AUDITING QUIZ

RULES OF THE QUIZQuiz contains Multiple Choice questions.The Quiz contains 60 questions based on various concepts. Three teams will be createdFor every correct answer +10 and -5 for wrong answer. Pass on will be allowed to next team and +5 for right answer and -5 for wrong answer.Time allowed is 20 Seconds/question to answer.

Financial statements need not to be prepared in accordance with:

Relevant statutory requirements

b) Accounting standards issued by the Institute of Chartered Accountants of India

c) Guidance Notes issued by the Institute of Chartered Accountants of India

d) Internal policies laid down by the management of the company.

ANSWER

D) Internal policies laid down by the management of the company.

If the financial statements are prepared in accordance with the required financial reporting framework, the auditor gives an opinion that the financial statements are :

a) Are reliable and dependable

b) Are correct and fair

c) Presenting "a true and fair view"

d) Are perfectly right

ANSWER

C) Give "a true and fair view"

3. The term "General Purpose Financial Statements" never includes. A cash flow statement

Statements and explanatory notes which form part thereof

Statement from the accountant of the company.

Supplementary schedules and information based on such statements.

ANSWER

C) Statement from the accountant of the company.

4. Which of the following errors is an error of principle?

Repairs to vehicle have been debited to Motor Car Account

b) Sale of Rs. 21,342 has been recorded as Rs. 21,324

Repairs to vehicle have been credited to Motor Car Account

None of these

ANSWER

A) Repairs to vehicle have been debited to Motor Car Account

5. Which of the following errors will affect the Trial Balance? Installation charges paid on new machinery have been debited to Repairs Account.

The total of sales journal is Rs.21,000 short

Repairs to building have been capitalized and debited to Building A/c.

None of these

ANSWER

B) The total of sales journal is Rs.21,000 short

6. The total of Purchase Book was not posted to the ledger. This is

Error of Omission

b) Error of Principle

c) Error of Commission d

) None of the above

ANSWER Error of Omission

7. Sales to SRK of Rs.12311 posted to his account as Rs.13211. This is

Error of Principle Error of Commission Error of Omission None of the above

ANSWER

B) Error of Commission

8. Goods of value of Rs.2311 were returned by SRK and were taken into stock on the same date but no entry was made in the books. This is

Error of Omission Error of Principle Error of Commission None of the above

ANSWER

A) Error of Omission

9. 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

ANSWERA) specified standards and plans

10. Which of the following is incorrect about auditor opinion on financial statements?

His opinion is no indication to future viability of business.

The auditor should express as opinion on financial statements.

) He is responsible for detection and prevention of frauds and errors in financial statements.

d) He should verify if recognized accounting principles have been followed.

ANSWER

C) He is responsible for detection and prevention of frauds and errors in financial statements

11. As per SA 240, if auditor detects an errors then

a) He should communicate it to the shareholders.

b) He should submit his resignation.

c) The auditor should ensure financial statements are adjusted for detected errors

d) He should call a meeting of board of directors.

ANSWER

C) The auditor should ensure financial statements are adjusted for detected errors

12. Which of the following is not a limitation of audit as per SA 240?

An auditor cannot rely upon experts.

c) Audit evidence is not conclusive.

b) Auditor cannot discover all frauds

d) Auditor cannot audit all transactions

ANSWER

A) An auditor cannot rely upon experts

13. The risk of fraud increases when

(a) The size of the company is very big.

(b) Auditors remain the same for many years.

(c) There are many people in the accounts department.

(d) Management is in the hands of a single person.

ANSWER

D) Management is in the hands of a single person.

14. Audit of banks is an example of

(a) Statutory audit

(b) Balance sheet audit

(c) Internal Audit

(d) All of the above

ANSWER

B) Balance sheet audit

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

a) Materiality provides a quantitative cut-off point.

b) SA 320 deals with materiality.

c) Materiality is a matter of professional judgment.

d) Auditor should consider materiality when drafting the audit report.

ANSWER

D) Auditor should consider materiality when drafting the audit report.

16) Internal Auditor is appointed by a) the management

b) the government

c) The statutory auditor

d) the shareholders

ANSWERA)the management

17) Which of the following is an objective of internal audit: a) Ensure proper accounting controls

b) Detection and prevention of errors and frauds

c) Physical verification of assets

d) All of the above.

ANSWER

D) All of the above.

18)Which of the following are benefits of audit planning (a) Appropriate attention to all important areas

(b) Proper control of audit

(c) Proper allocation of work

(d) All of the above.

ANSWERD) All of the above.

19) 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

ANSWERD) the client, the auditor, and the auditee

Fill in the blanks

20) .audit is suitable when number of transactions is very large

1- Final2-Statutory3-Continuous4-Internal

ANSWER

Continuous

21) __________ audit means an audit at regular intervals throughout the accounting year

1- Final2-Regular3-Continuous4-Internal

ANSWER

. Continuous

22) _________audit means an audit taken up after the end of the accounting year.

1- Final2-Statutory3-Continuous4-Internal

Final ANSWER

23) SA ________ deals with the concept of materiality.

1-5202-3203-2104-125

320ANSWER

24) SA _______ deals with the concept of going concern.

1-5202-3203-5704-125

570 ANSWER

25. Audit of company is ___________ audit.

1- Final2-Statutory3-Continuous4-Internal

ANSWER. statutory

26)_________ refers to presentation of accounts in a way that it shows a better positional than the actual position.

1-Window dressing2-Interim presentation3-Both 1 and 24-None of the above

. Window dressing ANSWER

27) Public Limited Companies listed on the stock exchange have to declare their results on a . basis.

1-Annually2-Quarterly3-Monthly4-Half yearly

ANSWERquarterly

28) The primary object of an audit is to enable the auditor to express an ..

1-decision2-view3-opinion4-none of the above

opinion ANSWER

29) .audit is the most common type of audit

1- Final2-Statutory3-Continuous4-Internal

Final ANSWER

30) THE word 'Audit' is originated from the Latin word which means 'to hear'.

1- Audire2-Adire3-Auduire4- Auditar

ANSWER

'audire'

31) is the "father " of the curriculum management audit and curriculum mapping.1-Fenwrck w. English2-Spicer and Pegler3-Maritona Mayer4- Jeff Bezoz

ANSWER

Fenwrck w. english

32)........is really a false representation or entry which is made always intentionally with some mischievous objectives.1-Error2- Fraud3-Crime4-Mistake

ANSWER

Fraud

33) Auditing shows the profitability and financial position of an organization which creates faith of public over the business. Thus, auditing helps to increase ..............of an organization?1- Worthiness2-Returns3-Goodwill4-Income

ANSWER

Goodwill

State whether true or false, giving reasons, in brief:

34) It is not the objective of the audit to give an opinion on the future prospect of business. A) TRUE B) FALSE

Answer :

TRUE

35) A unqualified audit report means that the business will be profitable in future

A) TRUE B) FALSE

False; According to SA 200, it is not the objective of the audit to give an opinion on the future prospects of business. Therefore, even if audit report is an unqualified audit report, it does not indicate whether the business will continue to be profitable in future. ANSWER

36) Error of duplication causes difference in the trial balance. A) TRUE B) FALSE

False; Difference in trial balance can be caused only by one-sided error like error of partial omission, error of posting and casting. Error of duplication is a two sided error. Hence, it does not cause difference in the Trial Balance.

NSWER :

37) If the amount is posted in the wrong account or it is written on the wrong side of an account, it is called as an error of commission.

A) TRUE

B) FALSE

ANSWER : TRUE

38) A secret reserve is legally allowed to be created by banks.

A) TRUE

B) FALSE

ANSWER: TRUE

39) Balance sheet Audit does not involve an examination of the various items in the Profit and Loss Account

A) TRUE

B) FALSE

False; Balance sheet Audit involves examination of significant items which affect the balance sheet.

ANSWER :

40) Auditing of accounts is compulsory in a sole proprietorship firm

A) TRUE

B) FALSE

False; There is no law specifically governing a sole proprietorship firm and no other law makes the audit of sole proprietorship firms compulsory. Hence, it is not compulsory.ANSWER:

41) The auditor must not disclose any information acquired by him in the course of his work without the written permission of the Institute of Chartered Accountant of India.

A) TRUE

B) FALSE

False; As per SA 200, the auditor must not disclose any information acquired by him in the course of his work to any third party. However, he may disclose information to a third party only with consent of the auditee. He need not consult the Institute of Chartered Accountants of India. ANSWER :

42) The opinion of the auditor should be unbiased and independent.

A) TRUE

B) FALSE

ANSWER: A) TRUE

43) Window dressing can be done by overstatement of assets and understatement of liabilities.

A) TRUE

B) FALSE

ANSWER :

A) TRUE

44) The auditor should act like a bloodhound and not a watchdog

A) TRUE

B) FALSE

ANSWER: False; The auditor should act like a watchdog and not a bloodhound

45) Interim audit of a company is compulsory under the Companies Act, 1956.

A) TRUE

B) FALSE

False; Interim audit is conducted between the annual audits. Annual audits are compulsory under the Companies Act, 1956. However, interim audit is not compulsory. ANSWER :

46) 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

True

Feature based questions

47) These features highlight the characteristics of which error ?There are items like purchases or sales which ought to have been recorded in the books of accounts but due to oversight or carelessness, they have been wholly omitted from being recorded. The errors which arise due to non-recording of certain items will not affect the Trial Balance and, the omission can be detected by careful scrutiny1-Error of commission2-Error of ommission3-Error of compensation4-Error of principle

ANSWER

Error of ommission

48) These features highlight the characteristics of which error ?Usually arise through negligence in the matter of recording some business transactions in the books of accounts. When a transaction though recorded in the journal has been wrongly entered in the books of original entry, error of commission is said to arise, e.g., a sale of Rs. 100 is entered in the sales book as Rs. 10. Such an error does not affect the Trial Balance.1-Error of commission2-Error of ommission3-Error of compensation4-Error of principle

ANSWER

Error of commission

49) These features highlight the characteristics of which error ?when an error is counterbalanced or compensated by any other error or errors so that the adverse effect of one on debit or credit side is neutralised by that of another on credit or debit sideSuch errors also creep up when an under casting of an account is counterbalanced by the overcastting of another account to the same extent and on the same side.1-Error of commission2-Error of ommission3-Error of compensation4-Error of principle

ANSWERError of compensation

50) These features highlight the characteristics of which error ? generally arise out of a disregard for the principles of accountancy. Such errors are sometimes committed intentionally to falsify and manipulate accounts with an objective of showing more or less profits than their actual figures.1-Error of commission2-Error of ommission3-Error of compensation4-Error of principle

ANSWER

Error of principle

51) These features highlight the characteristics of which error ? The theft of cash receipts and petty cash.The theft of cheques and other negotiable instruments. Payments made to fictitious creditors or workmen1-Missappropriation of accounts2- Missappropriation of cash3- Error of principle4- Error of compensation

ANSWER

Missappropriation of cash

SOME MORE MCQ

52. Audit is :

Science ArtBothNone of these

ANSWERC- both

53.The Double entry system of Book-keeping was evolved by:

A) StevensonB) WilsonC) Luca PacioloD)Churchill

ANSWERC) Luca Paciolo

54. Which of the following is responsible for establishing a private companys internal control?a. Management.b. Auditors.c. Management and auditors.D . Committee of Sponsoring Organizations.

ANSWERa. Management.

55. Which of the following is not one of the three primary objectives of effective internal control?a. Reliability of financial reportingb. Efficiency and effectiveness of operationsc. Compliance with laws and regulationsd. Assurance of elimination of business risk

ANSWERd. Assurance of elimination of business risk

56.Two key concepts that underlie managements design and implementation of internal control are:a. Costs and materiality.b. Absolute assurance and costs.c. Inherent limitations and reasonable assurance.d. Collusion and materiality.

ANSWERC. Inherent limitations and reasonable assurance.

57. Internal controls can never be considered as absolutely effective because a. Their effectiveness is limited by the competency and dependability of employees.b. Not all organizations have internal audit departments.c. Controls are designed to prevent and detect only material misstatements.d. Internal controls prevent separation of duties.

ANSWERa. Their effectiveness is limited by the competency and dependability of employees

58.A major control available in a small company, which might not be feasible in a big company, is: a- wider segregation of duties.b. a voucher system.c. fewer transactions to process.d. The owner-managers personal interest and close relationship with personnel.

ANSWERd. The owner-managers personal interest and close relationship with personnel.

59. Which of the following is responsible for establishing internal controls for a public company?a. Management.b. The PCAOBc. Management and auditors.d. Committee of Sponsoring Organizations.

ANSWERa. Management.

60-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

ANSWERA) specified standards and plans

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