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Audit MCQ
Audit MCQ
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Prepared by: Faizan Ch - MBA-FINANCE Cell: 0333-6973219
AUDIT MCQs FOR SENIOR AUDITOR TEST
10) The most difficult type of misstatement to detect fraud is based on:
A) Related party purchases
B) Related party sales
C) Related party sales
D) Omission of a sales transaction from being recorded.
11) 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 year end
C) Vouch goods sent on approval very carefully
D) Perform analytical procedures.
12) 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
13) 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
14) 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) Organization structure
A) (i) and (ii)
B) (ii) and (iii)
C) (i), (ii) and (iii)
D) i) and (iii)
15) 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.
16) The use of an audit engagement letter is the best method of assuring the auditor will have which
of the following?
A) Auditor will obtain sufficient appropriate audit evidence.
B) Management representation letter
C) Access to all books, accounts and vouchers required for audit purpose
D) Cooperation from other auditors
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Prepared by: Faizan Ch - MBA-FINANCE Cell: 0333-6973219
AUDIT MCQs FOR SENIOR AUDITOR TEST
17) The use of an audit engagement letter is the best method of documenting
i) the required communication of significant deficiencies in internal control
ii) significantly higher control risk than that assessed in prior audit.
iii) Objective and scope of auditor’s work
iv) Notification of any changes in the original arrangements of the audit.
A) (i) and (ii)
B) (i) and (iii)
C) (ii) and (iv)
D) (iii and (iv)
18) An auditor who accepts an audit but does not possess the industry expertise of the business
entity should
A) engage experts
B) obtain knowledge of matters that relate to the nature of entity’s business
C) inform management about it
D) take help of other auditors
19) The least important element in the evaluation of an audit firm’s system of quality control would
relate to
A) assignment of audit assistants
B) system of determining audit fees
C) consultation with experts
D) confidentiality of client’s information
20) Which of the following is not a quality control consideration on accepting a new client? Which
of the following is not a quality control consideration on accepting a new client?
A) Availability of audit assistants with necessary skill and competence.
B) Provision of other services to the client which may impair independence
C) Predecessor auditor’s advice as to whether audit fees were paid promptly
D) Review of audit work done by one partner by the other
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Prepared by: Faizan Ch - MBA-FINANCE Cell: 0333-6973219
AUDIT MCQs FOR SENIOR AUDITOR TEST
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Prepared by: Faizan Ch - MBA-FINANCE Cell: 0333-6973219
AUDIT MCQs FOR SENIOR AUDITOR TEST
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Prepared by: Faizan Ch - MBA-FINANCE Cell: 0333-6973219
AUDIT MCQs FOR SENIOR AUDITOR TEST
5) The nature, timing and extent of substantive procedures is related to assessed level of control risk
A) randomly B) disproportionately C) directly D) inversely
6) When is evidential matter, generally, considered sufficient?
A) When it constitutes entire population
B) When it is enough to provide a basis for giving reasonable assurance regarding truthfulness
C) When it is objective and relevant
D) When auditor collects and evaluates it independently
7) Which of the following is not a corroborative evidence?
A) Minutes of meetings
B) Confirmations from debtors
C) Information gathered by auditor through observation
D) Worksheet supporting consolidated financial statements
8) What would most appropriately describe the risk of incorrect rejection in terms of substantive
testing?
A) The auditor concludes balance is materially correct when in actual fact it is not
B) The auditor concludes that the balance is materially misstated when in actual fact it not
C) The auditor has rejected an item for sample which was material
D) None of the above
9) Which of the following affects audit effectiveness?
A) Risk of over reliance B) Risk of incorrect rejection
C) Risk of incorrect acceptance D) Both (a) and (c)
10) What would most effectively describe the risk of incorrect acceptance in terms of substantive
audit testing?
A) The auditor has ascertained that the balance is materially correct when in actual fact it is not
B) The auditor concludes the balance is materially misstated when in actual fact is not
C) The auditor has rejected an item from sample which was not supported by documentary evidence
D) He applies random sampling on data which is inaccurate and inconsistent
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Prepared by: Faizan Ch - MBA-FINANCE Cell: 0333-6973219
AUDIT MCQs FOR SENIOR AUDITOR TEST
4) Which of the following best describes the primary purpose of audit programme preparation?
A) To detect errors or fraud.
B) To comply with GAAP
C) To gather sufficient appropriate evidence
D) To assess audit risk
5) Which of the following is not an advantage of the preparation of working paper?
A) To provide a basis for review of audit work
B) To provide a basis for subsequent audits
C) To ensure audit work is being carried out as per programme
D) To provide a guide for advising another client on similar issues
6) The auditor’s permanent working paper file should not normally, include
A) extracts from client’s bank statements
B) past year’s financial statements
C) attorney’s letters
D) debt agreements
7) For what minimum period should audit working papers be retained by audit firm?
A) For the time period the entity remains a client of the audit firm.
B) For a period of ten years
C) For a period auditor opines them to be useful in servicing the client
D) For the period the audit firm is in existence.
8) Which of the following factors would least likely affect the quantity and content of an auditor’s
working papers
A) The assessed level of control risk
B) The possibility of peer review
C) The nature of auditor’s report
D) The content of management representation letter
9) Which of the following statement is true regarding an auditor’s working papers?
A) They document the level of independence maintained by the auditor
B) They should be considered as the principle support for the auditor’s report
C) They should not contain details regarding weaknesses in the internal control system
D) They help the auditor to monitor the effectiveness of the audit firm’s quality control
10) Which of the following statement best describes the understanding with respect to ownership
and custody of working papers prepared by an auditor?
A) The working papers may be obtained by third parties when they appear to be relevant to issues raised
in litigation
B) The safe custody of working papers is the responsibility of client, if kept at his premises
C) The working papers must be retained by an audit firm for a period of 10 years
D) Successor auditors may have access to working papers of the predecessor auditors. The approval of
client is not required.
11) The current file of the auditor’s working papers, generally, should include:
A) a flowchart of the internal controls
B) Organization charts
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Prepared by: Faizan Ch - MBA-FINANCE Cell: 0333-6973219
AUDIT MCQs FOR SENIOR AUDITOR TEST
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Prepared by: Faizan Ch - MBA-FINANCE Cell: 0333-6973219
AUDIT MCQs FOR SENIOR AUDITOR TEST
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Prepared by: Faizan Ch - MBA-FINANCE Cell: 0333-6973219
AUDIT MCQs FOR SENIOR AUDITOR TEST
10) While vouching, how will the auditor ensure himself that all credit sales transactions have been
recorded by the entity?
A) Examining cutoff points
B) Matching entries in the sales book against renumbered sales invoices and goods outward notes
C) Counting the number of invoices and matching the number with entries on sales book
D) Both (a) and (b)
6) 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. The
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_____?
A) unqualified opinion
B) unqualified opinion with reference to notes to the accounts
C) qualified opinion
D) disclaimer of opinion
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Prepared by: Faizan Ch - MBA-FINANCE Cell: 0333-6973219
AUDIT MCQs FOR SENIOR AUDITOR TEST
(i) a qualified opinion (ii) an unqualified opinion with emphasis of matter paragraph
(iii) an adverse opinion (iv) a disclaimer of opinion
A) i) only
B) i) and (iv) only
C) i), iii) and (iv) only
D) All of the above
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Prepared by: Faizan Ch - MBA-FINANCE Cell: 0333-6973219
AUDIT MCQs FOR SENIOR AUDITOR TEST
6) The auditor has noticed existence of recurring losses sale of fixed assets this indicates
A) Depreciation charges are insufficient
B) Policy of sale or disposal of fixed assets needs to be reviewed
C) The sale of assets have not been properly authorized
D) Accounting errors
7) Which of the following financial statements assertions are addressed by testing the cut off for
plant asset addition
A) Existence and ownership
B) Valuation and disclosure
C) Possession and ownership
D) Completeness and valuation
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Prepared by: Faizan Ch - MBA-FINANCE Cell: 0333-6973219
AUDIT MCQs FOR SENIOR AUDITOR TEST
8) The auditor while verifying prepaid insurance has concluded that there is inadequate insurance
of building He should___?
A) Modify his audit report
B) Insist it should be disclosed in the notes to financial statements
C) Write it in letter of weakness
D) Both (b) and (c)
9) While verifying intangible assets, an auditor would have recomputed amortization charges and
determine whether amortization period is reasonable. The auditor tries to establish ….by doing it
A) valuation
B) existence
C) disclosure
D) possession
10) When auditing prepaid insurance, an auditor discovers that the insurance policy bond on
building is not available for inspection. This may indicate____?
A) No insurance has been undertaken for building
B) Lien on building
C) Insurance premium has not been paid
D) Insurance premium paid but not recorded
11) Which of the following controls would ensure that securities are not lost, stolen or diverted?
A) Establish physical barriers over investment securities
B) Maintain files of authorized signatures
C) Segregate investment approval form accounting and from custody of securities
D) All of the above
12) Which of the following would give the assurance that debtors mentioned on the date of balance
sheet actually exist?
A) Sending debtor’s confirmation letters
B) Reviewing subsequent collection
C) Verify debtors against sales document
D) Both (a) and (b)
13) Analytical procedures are least likely to be use in the audit of?
A) cash balance
B) investments
C) bills receivables
D) debtors
14) Which of the following statements is not true with regard to teeming and lading ?
A) It results in the deliberate misappropriation of cash receipts
B) It is associated with cash receipts
C) If same individual maintains cash receipts and cash payments teeming and lading is likely to exist
D) To conceal the shortage, the defraud, usually, tries to keep bank and book amounts in daily agreement
so that a bank reconciliation will not detect the irregularity.
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Prepared by: Faizan Ch - MBA-FINANCE Cell: 0333-6973219
AUDIT MCQs FOR SENIOR AUDITOR TEST
15) 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
A) Cash in always material as materiality is qualitative concept
B) No audit of cash is needed when, in auditor’s opinion, cash is immaterial. Materiality is a relative
concept
C) The cash balance need only be audited if the balance is in overdraft
D) Cash is to be verified if control risk is assessed as high
16) When counting cash on hand the auditor should _____?
A) ensure presence of somebody from management
B) obtain a receipt from custodian as to its return
C) ensure postage and revenue stamps are not counted in physical count
D) temporary advances to employees are counted to calculate balance of cash in hand
17) Which of the following statement is not true regard to auditor’s attendance at stock taking?
A) Auditor should attend physical stock taking only if inventory is material
B) Auditor may not attend physical verification of stock by management, if he does not find it appropriate
to rely on it
C) Auditor may not attend physical verification of stock by management, if he does not find it appropriate
to rely on it
D) The primary objective of an auditor’s observation of an entity’s observation of an entity’s stock take is
to obtain direct knowledge that the stock and has been property counted
18) 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_____?
A) purchase returns B) sales returns
C) goods with consignor D) purchase discounts
19) Inspection report/receiving report supports entries in
A) sales book and sales return book
B) purchase book and sales return book
C) cash book and purchase book
D) Sales book and purchase return book
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Prepared by: Faizan Ch - MBA-FINANCE Cell: 0333-6973219
AUDIT MCQs FOR SENIOR AUDITOR TEST
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Prepared by: Faizan Ch - MBA-FINANCE Cell: 0333-6973219
AUDIT MCQs FOR SENIOR AUDITOR TEST
13) A flow chart, made by the auditor, of an entity’s internal control system is a graphic
representation that depicts the auditor’s.
A) understanding of the system
B) understanding of fraud risk factors
C) documentation of assessment of control risk
D) Both (a) and (c)
14) The performance of tests of control is documented in
A) audit programme
B) flow charts
C) working papers
D) any of the above
15) Which of the following statements is not correct?
A) Intern risk and control risk cannot be controlled by the management i.e are uncontrollable
B) Detection risk is related directly to the effectiveness of the auditor prosecutor
C) Detection risk related inversely to control risk
D) Internet risk and control risk are highly interrelated
16) The independence of an internal auditor will most likely be assured if he reports to the
A) President Finance B) President System C) Managing Director D) CEO
17) In comparison to the independent auditor, an internal auditor is more likely to be concerned with
A) cost accounting system
B) internal control system
C) legal compliance
D) accounting system
18) When an independent auditor decides that the work performed by internal auditors may have
bearing on the nature, timing and extent of planned audit procedures, the independent auditor should
evaluate objectivity of the internal auditor. The most important factor influencing it would be:
A) organizational level to which he reports
B) qualification of internal auditor
C) system of quality control of his work
D) all of the above
19) When an independent auditor relies on the work of an internal auditor, he or she should
A) examine the scope of internal auditor’s work
B) examine the system of supervising review and documentation of internal auditor’s work
C) adequacy of related audit programme
D) all of the above
20) Proper segregation of duties reduces the opportunities in which a person would both
A) establish controls and executes them
B) establish controls and executes them
C) perpetuate errors and frauds and conceals them
D) record the transaction in journal and ledger
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Prepared by: Faizan Ch - MBA-FINANCE Cell: 0333-6973219
AUDIT MCQs FOR SENIOR AUDITOR TEST
Auditing MCQS
SET-1
1) Which of the following are not objectives of auditing?
A) Ascertain the profit and preparation of P/L Account, Balance sheet.
B) Detection and prevention of frauds and errors.
C) Give a true and fair view of financial amount.
D) To submits the accounts to the Government
2) Which of the following is not a kind of audit?
A) Statutory and private audit.
B) Government and continuous audit.
C) Continuous, final, Interim, Cash, Cost and Management audit.
D) None of these.
3) An audit which is compulsory by the law __________.
A) Government audit.
B) Internal audit.
C) Cost audit.
D) Statutory audit.
4) Audit done by the employees of the business undertaking is called _______.
A) final audit.
B) management audit.
C) government audit.
D) company audit
5) Management audit otherwise called as _______.
A) final audit.
B) efficiency audit.
C) cost audit.
D) cash audit.
6) A number of checks and controls exercised in a business to ensure its efficient working is known
as ________.
A) Internal check. B) Internal control. C) Internal audit. D) Interim check.
7) Voucher relates to _________.
A) cash receipt. B) cash payment. C) credit transactions D) all the above.
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Prepared by: Faizan Ch - MBA-FINANCE Cell: 0333-6973219
AUDIT MCQs FOR SENIOR AUDITOR TEST
Auditing MCQS
SET-2
1) In order to ensure effective control, how often a full inventory count should be held when
perpetual inventory records are not kept adequately?
A) On a daily basis B) At least once a year C) At least monthly D) At least weekly
2) For the purpose of keeping effective control in the cash system, who should have no access to the
cash or the preparation of the paying-in slip?
A) Sales ledger personnel B) Teller/cashier C) Cash officers D) Operations manager
3) Internal sources of audit evidence for an entity includes the following EXCEPT:
A) Associated companies of the entity B) Accounting systems, records and documents
C) Non-financial data and records D) Management representation and discussion
4) Which of the following is the least concern to an auditor regarding the client’s internal control system?
A) Efficiency and effectiveness of operations
B) Controls related to the reliability of financial reporting
C) Controls over classes of transactions
D) Auditors are equally concern with each of the given issues
5) During test of control procedure its design can easily tested with the help of:
A) ICQs and walk through tests B) ICQs and judgment sample
C) ICQs and random sample D) ICQS and ICEC
6) The small audit firms provide the following services EXCEPT:
A) Liquidation and receivership work, fraud auditing
B) Financial management and system consultancy
C) Financial system planning and preparation
D) Tax management and statutory form filling
7) Which of the following is not included in the category of cash?
A) Deposit with banks B) Checks C) Postdated checks D) Money orders
8) For measuring the quality of audit evidence auditors used the tool of appropriateness; in case if
auditor wants to measure quantity of audit evidence which tools from the following should be adopted?
A) Relevance B) Reliability C) Sufficiency D) Effectiveness
9) When the cash sales should be recorded by the companies in order to achieve control objectives?
A) Record the cash sales when purchase order is received from the customer
B) Record the cash sales at the point they are made
C) Record the cash sales after some period
D) Record the cash sales weekly
10) Auditors conduct auditing in accordance with:
A) International Financial Reporting Standards
B) Local pronouncements/Legislations
C) Financial Accounting Standards Board
D) All of the given options
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Prepared by: Faizan Ch - MBA-FINANCE Cell: 0333-6973219
AUDIT MCQs FOR SENIOR AUDITOR TEST
Auditing MCQS
SET-3
1) A kind of audit conducted for a part of the accounting year is called _______.
A) Periodical audit. B) Partial audit. C) Cost audit. D) Cost audit.
2) For which of the following, Audit is optional?
A) Trusts. B) Joint stock companies.
C) Proprietorship concern. D) None of the above.
3) The audit that is made compulsory under statute is called _________.
A) Statutory audit. B) Partial audit. C) Complete audit. D) Continuous audit.
4) The receipt of goods must be entered in _________.
A) goods inward book. B) goods outward book C) receipt of Stores. D) cash payment register
5) Auditing standards differ from auditing procedures in that procedures relate to ________.
A) Measure of performance. B) Audit principles.
C) Acts to be performed. D) Audit judgments.
6) An audit programme is ___________.
A) a description, memorandum or an outline of the work to be done in a business.
B) the rules and regulations prescribed for writing up the books of accounts.
C) to gain knowledge of clients accounting system.
D) a trial work.
7) The main object of the audit of the cash book may be ________.
A) to verify the assets and liabilities.
B) to know that all receipts and payments have been properly recorded.
C) to check the internal control system in business
D) to check the bank balance
.8) The purpose of the audit of wage payment is to determine that __________.
A) the work is executed completely for which the workers are paid wages.
B) the workers are paid the correct amount of wages under proper authorization.
C) the workers are working regularly.
D) none of the above.
9) One of the audit procedures to check the issue of share capital of the newly formed company is
__________.
A) the memorandum of association and articles of association.
B) the share transfer register.
C) the issue of debenture.
D) none of the above.
10) Capital reserves are created out of profits of __________.
A) a revenue nature. B) a capital nature.
C) a secret reserve. D) contingency reserve.
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Prepared by: Faizan Ch - MBA-FINANCE Cell: 0333-6973219
AUDIT MCQs FOR SENIOR AUDITOR TEST
Auditing MCQS
SET-4
1) A good audit report must at least meet one of the following qualifications __________.
A) it should offer constructive and timely suggestions to the management.
B) it should not point out mistakes.
C) it should not be based on factual information.
D) it should not be based on balance sheet.
2) The work of one clerk is automatically check by another clerk is called _________.
A) Internal control. B) Internal check. C) Internal audit. D) None of the above.
3) The owners of the company are called __________.
A) Debenture holders. B) Debtors. C) Shareholders. D) None of the above.
4) Verification is __________.
A) the art of recording the business transaction.
B) an examination of the books of accounts.
C) the act of establishing the accuracy of entries in the books of accounts.
D) none of the above.
5) The main objects of investigation is _________.
A) to discover errors and frauds. B) to prevent errors and frauds.
C) to verify statements. D) all the above.
6) Internal controls and internal check are ____________.
A) one and the same.
B) different.
C) internal control includes internal check.
D) None of the above.
7) An auditor is like a ______.
A) Watchman. B) foolish dog. C) mad dog. D) watch dog.
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Prepared by: Faizan Ch - MBA-FINANCE Cell: 0333-6973219
AUDIT MCQs FOR SENIOR AUDITOR TEST
Auditing MCQS
SET-5
1) A company auditor can be removed by _________________.
A) board of directors. B) managing director. C) any director. D) general meeting.
2) A vacancy caused by resignation of an auditor is filled by _________.
A) board of directors. B) managing director. C) general meeting. D) central government.
3) Audit in depth means __________.
A) audit of each and every item. B) intensive audit of each and every item.
C) intensive audit of a few items. D) audit of a few selected items.
4) Concurrent audit is a part of ______________.
A) internal check system. B) continuous audit. C) internal audit system D) final audit.
5) Audit in depth is synonymous for ____________.
A) complete audit. B) completed audit. C) final audit. D) detailed audit.
6) Balance sheet audit included verification of ________.
A) assets.
B) liabilities.
C) income and expenditure accounts where appropriate.
D) all of the above.
7) 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 organisation has a good internal control system.
D) It is expensive.
8) Which of the following is not a fact of EPA?
A) Economic audit.
B) Efficiency audit.
C) Expenditure audit.
D) Effectiveness audit.
9) 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.
10) When issuing unqualified opinion the auditor who evaluated 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) estimated of the total likely misstatement is more than materiality level.
D) estimates of the total likely misstatement cannot be made.
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Prepared by: Faizan Ch - MBA-FINANCE Cell: 0333-6973219
AUDIT MCQs FOR SENIOR AUDITOR TEST
Auditing MCQS
SET-6
1) In determining the level of materiality for an audit what should not be considered?
A) Prior years errors. B) The auditor remuneration.
C) Adjusted interim financial statement. D) Prior year financial statements.
2) Analytical procedures issued in the planning stage of an audit, generally ___________.
A) helps to determine the nature, timing and extent of other audit procedures.
B) directs attention to potential risk areas.
C) indicate important aspects of business.
D) all of the above.
3) Of the following, which is the least persuasive type of audit evidence?
A) Bank statements obtained from the client.
B) Documents obtained by auditor from third parties directly.
C) Carbon copies of sales invoices inspected by the auditor.
D) Computations made by the auditor.
4) Computations made by the auditor.
A) the auditor. B) the client.
C) the audit assistants. D) the auditor and his audit assistants.
5) The working papers which auditor prepares for financial statements audit are _______ .
A) evidence for audit conclusions. B) owned by the client.
C) owned by the auditor. D) retained in auditor office until a change in auditors.
6) Which of the following best describes the primary purpose of audit programmed preparation?
A) To detect errors or fraud. B) To comply with GAAP.
C) To gather sufficient appropriate evidence. D) To assess audit risk.
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Prepared by: Faizan Ch - MBA-FINANCE Cell: 0333-6973219
AUDIT MCQs FOR SENIOR AUDITOR TEST
Auditing MCQS
SET-7
1) During audit of the financial statements, the auditors are concerned with the verification and
determination of which one of the following items?
A) Statements, accuracy, and feasibility B) Date, accuracy, and reliability
C) Policies, value, and reliability D) Cycle, policies, and reliability
2) The phrase (Scope of an Audit) refers to which one of the followings?
A) Engagement letters B) Audit procedures C) Audit evidence D) Reasonable assurance
3) The factors that affect reasonable assurance include all of the following EXCEP:
A) Use of testing (Sampling) B) Interest limitations of accounting and internal control
C) Remuneration of the auditor D) Persuasive nature of audit evidence
4) A well designed Internal Control Questionnaire (ICQ) should incorporate the following EXCEPT:
A) Be a sufficient source of data for the evaluation of internal controls
B) Identity the internal control system's strengths and weaknesses
C) Be organized by individual functional organizations
D) Should include simple yes or no responses but no narrative responses
5) Which one of the following is FALSE about Internal Control Evaluation Checklists (ICEC)?
A) ICEC is developed to overcome the shortcomings of Internal Control Questionnaire
B) The rules of constructing ICEC is different than construction of Internal Control Questionnaire
C) It is designed to determine, whether desirable internal controls are present
D) It is normally employed where system's information has already been recorded
6) An auditor's flow chart of an entity's information system is a diagrammatic representation. It
depicts what kind of information?
A) Program for tests of control
B) Understanding of the system
C) Understanding of the types of irregularity that are probable given by the present system
D) Documentation of the study and evaluation of the system
7) Which one of the following is NOT a factor included in the control environment of an entity?
A) Integrity and ethical values B) Risk assessment
C) Commitment to competence D) Organization structure
8) The audit which is a review of any part of an entity's operating procedures and methods is known as:
A) Financial statement audits B) Operational audits C) Technical Audits D) Compliance audits
9) Analytical procedures used in planning an audit should focus on identifying which one of the below.
A) Areas that may represent specific risks relevant to the audit
B) Material weaknesses in the internal control structure
C) The predictability of financial data form individual transactions
D) The various assertions that are embodied in the financial report
10) Which one of the following is an objective of the internal audit?
A) To report on financial statements
B) To check accounting system and internal control are operating efficiently
C) To determine the accuracy of financial statement values and disclosures
D) To establish a control system in the company
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Prepared by: Faizan Ch - MBA-FINANCE Cell: 0333-6973219
AUDIT MCQs FOR SENIOR AUDITOR TEST
Auditing MCQS
SET-8
1) Which one of the following persons is responsible for the preparation of Audit engagement later?
A) Auditor B) Client C) Company registrar D) Company secretary
2) Who is responsible for designing and preparing the financial statements?
A) Auditor B) Management C) Accountant D) Company secretary
3) Which one of the following is the method of assessing the internal control system of an entity?
A) Audit procedures B) Audit evidence C) Compliance audit D) Technical analysis
4) The purpose of engagement letter includes the following EXCEPT:
A) To defines the auditor responsibilities clearly
B) To minimize misunderstandings between the client and auditors
C) To educate the client
D) To help the auditor in preparing audit report
5) A manufacturing company wants to hire external auditors who examine the activities operations
procedures and processes of each department of the company. The company follows the local and
international laws rules and regulations and also has set standards for the efficiency and
effectiveness. The company shall have to provide the access of all kind of operational information
that will be required to the auditors as audit evidences. Considering the above situation select the
most suitable type of audit which the company should opt?
A) Compliance audit B) Operational audit C) Technology audit D) Financial audit
6) Which one of the following is considered as the formal opinion or disclaimer thereof issued by an
independent auditor as a result of audit or evaluation performed on a legal entity?
A) Financial report B) Financial statement C) Director report D) Auditor's report
7) Which of the following statements is true?
A) The auditing profession is unregulated
B) The auditing profession is regulated only by its own professional body
C) Outside bodies sometimes become involved in the regulation of the audit profession
D) The auditing profession is regulated only by the government
8) Which one of the following primary assertions is satisfied when an auditor ensures that there are no
unrecorded assets liabilities transactions or events or undisclosed items in the client financial records?
A) Valuation B) Completeness C) Existence D) Rights and obligations
9) Internal control is primarily established within a company to do which of the following?
A) To prevent fraud in the company affairs
B) To provide reasonable assurance that the company's objectives will be achieved
C) To catch all errors that may occur in the company
D) To aid in the effective auditing of the company
10) Where the auditor relies more on the system of internal control the circumstance warrant:
A) He spends more time on audit
B) Effectiveness of the audit is affected
C) Efficiency of the audit is affected
D) Reliability of the results of the tests is affected
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Prepared by: Faizan Ch - MBA-FINANCE Cell: 0333-6973219
AUDIT MCQs FOR SENIOR AUDITOR TEST
Auditing MCQS
SET-9
1) Stratification is a process of dividing a population into sub- populations which have
A) Heterogeneous characteristics B) Nothing in common
C) A lot of sampling units D) Homogeneous characteristics
2) Test of controls comprise of testing of all EXCEPT
A) Design B) Implementation
C) Operating efficiency D) Operating effectiveness
3) Analytical procedures are carried out for which one of the following purposes?
A) To reduce detection risk B) To assess inherent risk
C) To reduce control risk D) To determine detection risk
4) The auditors are required to perform tests of controls when
A) The internal controls are operating inefficiently
B) Substantive procedures alone provide sufficient appropriate audit evidence at the assertion level.
C) Substantive procedures alone do not provide sufficient appropriate audit evidence at the assertion
level.
D) Analytical procedures alone do not provide sufficient appropriate audit evidence at the assertion level.
5) Following descriptions are the examples of substantive testing EXCEPT:
A) Test of account balances to verify the correctness of the amounts
B) Verification that an operating system and/or applications are configured appropriately to the
companies needs
C) Review of minutes of directors; meetings and inquiry
D) Use of statistical sampling to determine the accuracy of financial statement figures
6) How often Inventory levels should be checked against the inventory records in order to keep its
control effectively?
A) Rarely B) Periodically C) Never D) Daily
7) What auditors seek in the register of non-current assets for each major group of assets?
A) Details of each item its cost and residual value
B) Details of each item its cost and accumulated depreciation
C) Details of each item its cost and depreciation
D) Details of each item its cost and capital investment expected returns
8) Which one of the following may not be any matter relevant to verification of assets?
A) Taxation B) Vouching C) Insurance D) The letter of representation
9) An Automobile Company hires auditors at the year end. Auditors are at the stage of verification
and vouching of company financials. Before examining the equity section, they develop general
aspects concerning the owner equity. In your opinion which one of the following aspects may NOT
be considered by the auditors during this assessment?
A) Share capital is properly classified and described in the accounts
B) Capital stock is enough to execute the company financial needs
C) Reserves are properly classified and presented
D) Movements in reserves are properly authorized
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Prepared by: Faizan Ch - MBA-FINANCE Cell: 0333-6973219
AUDIT MCQs FOR SENIOR AUDITOR TEST
10) Noncurrent assets manufactured or constructed by the company itself should reflect which
types of costs in the costing records?
A) Direct costs plus relevant overhead but not include any profit
B) Direct costs plus relevant overhead and any profit earned on it
C) Indirect costs plus relevant overhead but not include any profit
D) Indirect costs plus relevant overhead and any profit earned on it
Auditing MCQS
SET-10
1) Which one of the following matters should be included in the letter of representation?
A) Existence of any immaterial mistake in the statements
B) Existence of any fraud or error in the statements
C) Company growth trend in the future in figures
D) Market value of the company stock
2) Who should prepare the annual capital expenditure budgets of the company in order to keep
effective?
A) Someone directly responsible to the shareholders
B) Someone directly responsible for goods delivery to the customers
C) Someone directly responsible to the board of directors
D) Someone directly responsible to deal with the suppliers
3) IFRS stands for which one of the following?
A) International Financial Reporting Standards
B) International Financial Recording Systems
C) International Financial Recording Statements
D) International Financial Reporting Systems
4) When an auditor increases the assessed level of control risk because certain control activities
were determined to be ineffective, which of the following would most likely be increased by the
auditor?
A) Extent of tests of controls
B) Level of detection risk
C) Extent of tests of details
D) Level of inherent risk
5) Which of the following is one of the most fundamental and effective internal controls?
A) Increased use of computers for recording accounting transactions
B) Increased reliance on internal auditors to monitor accounting systems
C) Segregation of incompatible duties across several people
D) Having internal auditors report only to the Board of Directors
6) Tracing selected shipments to the sales journal to be sure that each one is included is a test of
which of the following?
A) Accuracy
B) Classification
C) Completeness
D) Existence
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Prepared by: Faizan Ch - MBA-FINANCE Cell: 0333-6973219
AUDIT MCQs FOR SENIOR AUDITOR TEST
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Prepared by: Faizan Ch - MBA-FINANCE Cell: 0333-6973219