A.UCil t n upv;,,.

of ·~~~;-~i;~r.;;;---~d)~~~~~~:::-----.12~
Records for
f~tCC-ords for (d) Error of duplication 179

'..(tltJJlYd.t purpose 6. Which of the followi .

,' Ati 1 true? ng statements is not
. ct of an audit is - (a) Management fraud . .
111aifl o~Je of opinion detect than employee fr~su;ore difficult to
,1ter:"pres~100and prevention of fraud and (b) Internal control t
(ll) J.1 tecuort possibility of syS em reduces the
(b) oe fraud and manag::urrte~ce of employee
rror ) and (b) . (c )The . , en 1raud
e) aoth (a the type of audit. d . auditor s responsibilit for
(c pends on . _ etectton and P . Y
(d) ()e AAS-2 issued by Council of frauds is similar. revention of errors and
0
'[he title ~ (d) All statements are correct.
' 1cAI is-:- and Scope of the Financial 7.
Objective As per AAS-4 I·f d"
(a) • ots • then- au 1tor detects an error
51atenle . and Scope of the Au~1t of
Objecuve (~) He should infonn the management. .
(b) . 1 Statements .
financ!a . e and Scope of Business of an ( ) He sho~l~ ~ommunicate it to the
(c) ObJecUV . management if It is material
Entity. f e and Scope of Financial (c) The auditor should ensure financial
(d) o~;~t:vAudit statements are adjusted for detected
stateu• errors. ·
. h f the following is not true about d) Both (b) and (c)✓
WhtC O • ?
J. . • on financial statements.
op1ruon . . 8.
auditor should express an opm1on Which of the following is not a limitation
(a)The .
financial statements. of audit as per AAS-4?
;) His opinio~ is no guarantee to future (a) Objectivity of auditor's judgment
'ability of business (b) Selective testing
~~) He.is responsible for detecti?n and (c) Persuasiveness of evidence✓
prevention of frauds and errors n;1 (d) Limitations of internal control s.ystem.
financial statements ·
(d)He should examine whether recognised 9. How many principles are listed in AAS-1
accounting principle have been which govern auditor's professional
consistently obligation?
(a) Nine (b) Fourteen
4. A sale of Rs. 50.000 to A was entered as
(c) Seven (d) Eight
a sale to B. This is an example of
(a) Error of omission
(b) Error of commission
10. Both auditing and accounting are
(c) Compensating error concerned with financial statements.
(d) Error of principle Which of the following
(a) Auditing uses the theory of evidence to
i. Goods sent on approval basis' have been verify the financial information made
recorded as 'Credit sales' . This is an available by Accountancy.
example of (b) A.uditing lends credibility dimension
(a) Error of principle and quality dimension to the financial
(b) Error of commission statements prepared by the accountant.
(c) Error of omission
 Scrutiny 0 fR
- - - ; : ~.:.:.7"e~c~o~r~d:.s.!.fo~r!_A~u~d~i!_t~P~n~,p~o?_:s~
·e;___ _--:------:--:--:-~-~---
~~
(c) Auditor should have through (a) All risk. factors
knowledge of accounting concepts AAS-4, should be as lllenr
and convention to enable him to express documented along With r consi(je;0 ~cq
an opinion on financial statements (b) Document the ide ~sPonse C(j ,
1
(d) All of the above. risk factors along wi·th l1hficati 011 °lhe
res · or 1

(c) . Document material . P0 nse to fr,

I I. The risk of management fraud increases in and response to thern.. 1rauct, ris~t~~
the presence of: (d) No documentation . itc1
in req •
(a) Frequent changes in supplies . llltect
(b) Improved internal control system 16. Which of the foll . .
. owing 1.
(c)- Substantial increases in sales app~·opnate potential r , _ lh, 5

(d) :''v1anugi:mcnt incentive system based auditor to his assess,1 cact1011 c . 111
. . 1cn1 th• ,1
on sales done in a quarter material misstatement d at th, •
. I· . . ui..: to r· r1s1,
111 re atron to existence . . r;iuct Is l
I .2. . . o 1 rn\'c r.
Auditing standards differ from audit ( a ) V1s1t location 011 _ntory;
. surp 11 .
procedures in that procedures relate to o b serve test counts se basis
(a) Audit assumptions (b) Request inventory co
( h) acts to be pcrfom1cd to year-end unt at a date cl
(c) quality criterion (c)Vouch goods sent on .
(u) methods of work carefully approval 1
(d) Perform analytical proc d
. e llres.
13. \Vhich of the following factors likely to be
iden~i fied as a fraud factor by the auditor? 17. Which of the following is not 1.k
- 1 elq 0
( a) The company is planning a initial a frau d nsk factor . ;
, re1atrng
public offer of quality shares to raise management s characteristics
additional capital for expansion. (a) Tax. evasion
(b) Bank reconciliation statement includes (b)
.
.. k
Failure to correct known ,, Qn~
deposits-in-transit: mtemal control system ·
( c) Plant and machinery is sold at a loss. (c~ ~doption of copscrvati ve accoum
(d) The company has made political pnnc1ples .
contributions. (d) High management turnover

14. The most difficult type of misstatement to 18. Professional skepticism requires that
detect fraud is based on: auditor assume that management is:
(a) Related party purchases (a) reasonably honest
(b) Related party sales (b) Neither honest nor dishonest
( c) The restatement of sales (c) Not necessarily honest
(d) Omission of a sales transaction from (d) Dishonest unless proved otherwise
being recorded.
19. Which of the following infonna
· du
15. Which of the following statements is should a successor auditor obtain
correct concerning the required the inquiry of the predecessor aUt
documentation in working papers of fraud before accepting engagement? .
risk assessment undertaken by the (a)Infonnation about integntY
auditor? man~gement .. rnanagci:
(b )Disagreement "'' th
.. rocedurcs
concerning au d1t1ng r
 Js for Audit Pruposc
accor
i" f intemal control system.
· \\I 0 The Ieast ·
~ · ' ~,\.,c
1
. ,1iofl structure eva\uar irnpon .

I
re~t·'tl 1l • t~
11
;onfld~:~) b) _(ii) and (iii) c) (i) , (ii) and qua\it ion of an .an\ elem l81
1
l l u11
a') Y_control w audit linn•ent in the
. (·• ) ( ass,g,
lo th <ll)q
Ct))
, 1(' ·)and 111
~. ) J) I •
(b) nrnent ofOUld _relate to.s system of
system audn as .
)Of
th flt%cJ. l''' . engagement letter, generally (c) consu\t·at·10n of. detenns~ s~nts
k /111. .,be aiJJit tude a reference to each of th; 1n1n
(d) confid . With exp g audit re
aq() 1 Id 111c enttalit erts cs
ts :-\ .hol.l . except Yof c\ienr .
)'' v111g. s of aud.1tmg
i 11D\
·
25 . The prim s information
I'0 • ·i:1ll
011
,11111 11 'bilitics of management with quality con~ry pu~osc of
( ,011s1 deciding rol_ policies and establishing
tb)rcSI •iudit work on che t Proced
cct to • f
fl.,sp t tion o rece1v111g a written . . (a) ensure adh n evaluation isl ures for
(C)e~
-pCC aent representation . lcttcr. a d' . ercnce t o-
;i"e1n . . , u itmg standards o genera\\y ac cepted
(b)
,,,an ::,d cription of the auditor s method acceptance
a es whose or retention .
td) le selection. int . management d of clients
1
1
asis to of san P egnty . oes not lack
of an audit engagement letter is (c) ensure audit f .
t h eeswts ch
te ct 0 se :I- lhe use f .
best method o assunng the auditor o t e type of audit k arg~d according
th~ have which of the following? (d)a\lofthe b or assigned
. a ove
ii Very 111111 ditor w1·11 obtam . ~ufficient
(a) Au . .d
priate audit ev1 ence. . 26. Which of the followi .
co_ntrol consideration ng is not. a quality
~~j~anagernent representation letter chent? on accepting a new.
) Access to all books, accounts and
Ylo be ~ouchers required for audit purpose (a) Availability of audit .
necessary skill d . assistants with
lo [d) cooperation from other auditors an competence
(bi _P~ovisio~ of ~t~er services ~o the client
w IC may impau independence
1css in ,, The use of an audit engagement letter is
(c) Predecessor auditor's advice to
·· the best method of documenting wheth~r .audit fees were paid prompt:;
Jnting (i)the requir~? . co~~unication of (d) Review of audit work done by one
significant defic1enc1es m mtemal control partner by the other
(ii) significantly higher control risk than
that assessed in prior audit. 27. Aft auditor obtains knowledge about a
it the (iii) Objective and scope of auditor's work new client's bus\ness and its industry to-
iv) Notification of any changes in the (a) Make constructive suggestions
original arrangements of the audit. concerning improvements to the client's
a)(i) and (iiTb) (i) and (iii) c) ii and (iv) internal control system.
d)(iii)and(iv) ' (b) Evaluate the appropriateness of audit
evidence obtained
,,•.l.
An auditor who accepts an audit but does (c) Understand the events and transactions
not possess the industry expertise of the that may have an •effect on client's
1tion
1rrng business entity should. · financial statements.
ii tor (al engage experts d) All of the above
(h) ohtain knowledge of matters that
of relate tn ·the nature of entity's
business
1c11l (cl inform managem~nt about it
(d) take hct'p or other auditors
 d"t
1 propose ------rc~c)llE~xqp;e~n•?iture a~dit_
Scrutiny of Records for Au G (d) Effecttveness audit
CONCEPTS OF AUDITIN .
The Delhi Government had .
1. Audit of banks is an example of 8. six bung~lows for its con~\~~ \
(a) Statutory au.? it They are lying unoccupied for ~ 1n1s1t?i
(b) Balance sheet audit years. This would be a ast th,~
(c) Concurrent audit f the above concern·for- matter Qf
(d) Both (a) and (b) e) All O (a)Propriety Auditor
13
(b )Perfom1ance Auditor
2. Concurrent audit is a part of- (c) Financial Auditor
(a) Internal check system . (d) None of the above
(b) Continuous audit
(c) Internal audit system
9. Financial auditor is not concer
(d) None
Propriety of business trannect \~i~
is .
However, the exceptions to this
sactioll1.
balance sheet audit
3. In
contained for audit of limited co rule illl
synonymous to- . mpanici
(a) Annual audit m.
(b) Continuous audit (a) Section 227 (IA) of the Com .
Act, 1956 Panici
(c) Detailed audit
(d) Statutory audit (b) Section 227 (IA) and section 227,
of the Act 4 I·
'A)
4. Audit in depth is synonymous for- (c) CARO, 2003
(a) Complete audit (d) Section 227 (IA) and CARO, 2003
(b) Completed audit
(c) Final audit 10. Balance sheet does not include-
(d) Detailed audit ( a) Verification of assets and liabilities
(b) Vouching of . income and expense
5. Balance sheet audit includes verification accounts related to assets and liabilities
of ( c) Examination of adjusting and closing
(a) Assets (b) Liabilities entries
( c) Income and expense accounts where ( d) Routine checks
appropriate
(d) All of the above 11. Which of the following statements is not
correct about materiality?
6. Which of the following statements is not (a) Materi~lity is a relative concept .
true about continuous audit? (b) Materiality judgments involve bofr1
(a) It is conducted at regular interval quantitative and qualitative judgme~ts_ .
(b) It may be carried out on daily basis c) Auditor's consideration of matenahcy i\
(c) It is needed when the organization has influenced by the auditor's perception o!
a good internal control system · •·
the needs of an informed decision m
ake1
(d) It is expensive who will rely on the financial statement:
(d) At the planning state, the aud1to1-~\
7. Which of the following is not a fact of . . . . financ1
considers matenahty at the 1
EPA?
statement level only \
(a) Economic audit
(b) Efficiency audit .If
 _ ds for Audit Prupose
rizecor .
ii)' o d't risk,..... the materiality
4 11 nlJ I
t.' i11v " dit effort ~or al! audits
.. h~ :iu L
1; ·. _. ..I \V~r, Higher, ower .
tn accord of financial 183
~t had (
~) l,O Lower, Higher anaJYtica1 ance With AAsstatemcnts lllad
• C()h \V~r,
••Stl'\t of the auct· Procedures i •14, the us c
Its 11,, ~?ghcr. Lower, L~wer (· ) llor in . s at the . c of
lpied f; lllirl' ~teq id I I Higher, Higher a Substanr Which stag '> discretion
be or la ts1~ts 1.,o\vcr, (b) Plann· ive testing e.
a st th . (dl
n1<1tter r~ (c) 0 ing stage
issuing unqualified opinion, the Verall r .
Of (d) All of th eview stage
\Vh~11 r who evaluates the audit findings
1 e above
/.· ~,1d 110 be satisfied that the
18. The b .
sho111d ount of known misstatement is as1c assu .
(~ ) Al11 ,ted in work"mg papers of anal • mption u d
cume1 (a) 1t'chal procedures~ ~rlying the use
d0 . ,ates of the total likely elps th ·
t concerned (b)fsllll
. tcrnent 1s .
less th an matenahty
. .
level relationship
· r
e auditor to
among I study
ss tran \vith i1ssta f the total likely m1ormation e ements of fitnanc1al
.
n Estimate o
s to th. sactioh. (c) ternent 1s more than materially (b) Relationsh"1p
. IS tu) ·~.
n11ssta continue
· in th among data exist and
Htect e ~..
comp :-it Je\'el condition to the e absence of known
<Illies d) Estimates of the total likely contrary
(c) Analytical proced .
f the C ( t cannot be made
ornp~.......1es
· 111isstaternen to detect unusual ·1 ~res ~111 not be able
(d) N re ationsh1ps
section 227( ;\) detennining the level of materiality for one of the above.
4
I~- ~~ audit, what should not be considered?
19. What are analytica\·procedures?
al Prior year's errors · (a)Substantive tests d . ·
( . ' 1· control risk esigned to assess
(b) The aud1t?r s ~emunera _ion
(c) Adjusted mtenm fi_ nancial statements
:lude- (d) Prior year's fin;mc1al statements
~~~ Subst~tdi~e tests designed to evaluate
nd liabilities va ~ lly of management'
representation letter s
e a~d expense Ii. Analytical procedures . issued in the (c) ~ubst~ntive tests designed to study
:0 d liabilities planning stage of an audit, generally relationships between financial and
mg an_d closing (a) helps to detennine the nature, timing non-financial
and extent of other audit procedures _ (d) All of the above
(bJ directs attention to potential risk areas
(c) indicates important aspects of business 20. Which of the following 1s not an
:itements is not d) All of the above analytical procedure?
(a) Tracing of purchases recurred in the
:oncept 16. Which of the following statements is most purchase book to purchase invoices.
involve both closely associated with _analytical (b) Comparing aggregate wages paid to
judgments procedure applied at substantive stage? number of employees
f materiality is (c) Comparing the actual costs with
(a) It helps to study relationship among
perception of standard costs
balance sheet accounts
ecision maker (d) All of them are analytical procedure
(b)lt helps to discover material
11 statements
misstatement,s in the financial statements
the auditor 21. When applying analytical pro_cedures, an
'the financial (c) It helps to identify possible oversights auditor could develop independent _
(d) It helps to accumulate evidence estimate of an account balance to compare
supporting the validity of a speci fie
it to-
acrnu111 halance (a) client's unedited account balance
 Scrutiny of Records for Audit Prupose
(b) client's unedited accoui1t balance (b) are designed to .
a<lj listed for trends in the industry subsequent events dis
(c) Prior year audited balance (c) will increase pro
• d POrti 0 le.
( <l) Prior year audited balance adjust~d for au d 1tor ecreases th nateJ ,i

trends in the industry · control risk e assess Y Whl'.

ed I ·,1 ~
(d) may be test of Cve1 ·
22. What is the primary objccti,..: of balance and analytica/ransaClion t,
analytical procedures used in the overall Procedu s, lcs
res t r.r
review stage of an audit? 4. The nature
. , 11·n1 1ng
·
, '
(a) To help to corroborate the conclusions substantive proced anct
ures .
drawn from individual components of assessed level of coi1t rol · rs
financial statements (a) randomly rrsk
(h) To reduce speci fie detection risk (b) disproportionately
(c) To direct attention to potential risk (c) directly '
areas .., (d) inversely
(d) To satisfy doubts when questions arise ·
about a clienCs ability to continue 5. Which of the follow·
important in ~ng fa~tors is ·
. . etenn,n·1 llJo·•
AUDIT EVIDENCE appropnat1ons of audit . ng '·
. . ev1den ~,11
(a) The rehab1lity of auct· . Ce?
I . It ev,ct
I. Of the following, which is the least re evance m meeting th . ence and .
. e auctn ob· ,~
persuasive type of audit evidence? (b) The objectivity and i .~ective
auditor ntegnty of the
(a) Bank statements obtained from the
client (c) The quantity of audit .d
. ev1 cnce
(b) Documents obtained by auditor from (d) Tlle independence of h
third parties directly. evidence t c source 0~
(c) Carbon copies of
sales mvo1ces
inspected by the auditor 6. When is evidential matter
(d) Computations made by the auditor considered sufficient? · gcner~!).
(a) When it constitutes entire .
2. \\'hich of the following statements 1s, (b) WI1en 1t
· ·
1s enough to nrov·d
populat10·
."
fi . . . t' icab:1.1,1
generally. corTect about the reliability of or gtvmg reasonable assurance .·
truthfulness regard'"!
audit evidence?
(a) To be reliable, evidence should (c) When it is objective and relevant
conclusive rather than persuasive ~d) When auditor collects anJ ci.iluJiilr.
(h) Effective internal control system 1ndepc11Jc11tly
provides reliable audit evidence
(cl E, idcncc ·obtained from outside 7. Whid1 of the following 1s 1101 1
' I ,urn:s rowed through the clienl
corrohorall\'C C\'idcncL·.'
I d ) , \ II ;in: CLHTL'L' I. (a) M irwtcs of 11h:ct111gs
(b) Co11fin11ations from debtors
I11 ,.111 aud i I or ti nanc ial
statements. ( c) In formation gathered hy audi1c·
:-. uh,1.111ti, L' 1cs1s ;ire audit pwccdurcs that through obser·,atrPn
(d) \Vorkshcct suppllrtlll~ ~l 111,11i1 JJ1.:
I .i I 111;i~ hL· di111i11afL•d li.ir an account
h~1b11cc undL·r certain L"Ulld111u11:--.
financial state ments

I
 d't prupose 185
for j\U I tcrnents is not AUDIT PREPARATION
,,,,corJs . 11owing sta n1anagement
fl' fO tO
11! , , ,,,f ttlc rcsPe~t as per AAS-11 ? I. Which of the fo llowing Aud it11,g
d1,cl1 ,jth obtained of relevant Assurance Standard d eals with \ ud1t
' . '' ·on 5 d coPY d ·d · s
. t1'1.: .-i:nt:ill tic:.1tc
r1.' 1,cn · gs 111
aY be rcgar e a Planning?
I i•r ,.,Lil f rr1ccttrl entation . (a) AAS-7 (b) AAS -?)
1,11 i,1.:5 o nt rcpres e in working (cJ AAS-9 (d) A'\, _1
i,1111 . ,c111C 1ways b_ the report date
1,11•'~ i!d :1 d nor to .
11 • 11 ~11ot Jatc P d to the auditor 2. Audit programme is prepared by-
·,1 • ,, i,c
I I I ,11;1 .T t,e at
idresse
., , I tild . (a) the auditor
' 11 I' silo priately describe (b) the client
,, t appro f
iJ ,110s . tion in terms o (c) the audit assistants
,, ot• . ,,-eel reJCC
,, 11;11 . nf 111c~ ., . (d) the auditor and his audit assistants
. r,.,1-
I . nll'i.; , tc:;ung · des balance 1s
11" 1 . cone 1u . . .
1i1,~1, , 1ud1tor . 1 actual fact 1t 1s
' rhL ' ·eel when JI J. The working papers which auditor
I·" 1..1llV con • prepares for financial statements audit are
111i11-' " • d that the balance
. . unclu es r. (a) e vidence for audit conclusions
,1,11 • ·lltdtto• c d vhen in actual 1act
1111 fh1. .•. )Iv n1isstate , (b) owned by the client
1
'111;11.:1 , .., • . (c) owned by the aud itor
ected an
• 1tem for (d) retained in auditor's office until a
il 11,11 d1·wr has reJ
·11 , au . I
1,1 ·1,kc,, t,1c. was ,natena change in auditors
1l
~j1111. , f the above
'\;t11ll: 0
ll11 . 4. The quantity of audit working papers
following affects audit complied on engagement would most be
. f tile
I \\'h1Ch l) •)
··•c1i, cncss . affected by
.:111. . k of over reliance (a) management's integrity
I RI~ . .
1.1, . r . ,correct reJecuon (b) auditor's experience and professional
1111 Risk o1 II
. k of inco.r rcct acceptance judgment
tel R1s
1Jl Both (a) and (c) (c) auditor's qualification
(d) control risk
. · Id most effectively describe the
ii. \\ hat wou . t s of
risk or incon-ect acceptance m em, 5. Which of the following best describes the
. . . ')
substantive audit testing• primary purpose of audit programme
(al The :rnditor has ascertained that tl~e preparation?
halancc is materially correct when Ill (a) To detect errors or fraud .
,ll'lllal fact it is not (b) To comply\\ ith GAAP
1h1 fhc auditor c:nncludes the balance is
(c) To gather sufficient appropriate
111.ttcrially misstated when in actual fact is
ll01
evidence
kl ·1ht· :111ditor has rejected an item from (d) To assess audit risk
~ampk "h il:11 \\ as not supported hy
dncunh:ntar;v· 1.·. , ·id~ncc Which of the following is not an
!di Hi.: applii:!) random sampling on data auvantage of the preparation of working
11 1
h d1 is inaccurate and rnconsis tcnt paper?
(a) TL) provide a b·1sis for review of audit
w ork
 Scrutiny of Records for Audit Propose
(b)· To provide a basis for subsequent
audits
11. 1ch o f the follow·
Wh" ~
describes the understa~ 8tatctn I\
(c) To ensure audit work is being carried to ownership and c 1
ng \VifhCrit ~
out as per programme papers prepared by an ~~~~y of ; c~
(d) To provide a guide for advising (a) The working pape . lton tltli,
.d . rs ma
b y t h ir p~rt1es when. the Y be Ob . '
,,
another client on similar issues
relevant to issues raised • ~ apPea 'aitit
7. The auditor's permanent working paper (b) The safe custody of
in hr1 rt ·
?ati00 l °
file should not normally, include- ~e responsibiJity of cli:or~ng Pa
premises nt, If k Pers :
(a) extracts from client's bank statements - ei>t at
(b) past year's financial statements (c) The working paper t1

b y an aud1t . s must b
(c) attorney's letters finn for a p . e re1a·
(b) debt agreements (d) Successor auditors menoct of lo IJ\t
working papers of : have acc!ea
8. For what minimum period should audit auditors. The approval 0 ; ~redec~ 1
required. chent is s,
working papers be r~tained by audit firm? n
(a) For the time period the entity remains
a client of the audit firm. 12. The current file of the auct· .
1tor's
(b) For a period of ten years papers, generally, should include- Workin
(c) For a period auditor opines them to be ( a) a flowchart of the.internal co
useful in servicing the client (b) Organisation charts ntrols
d) For the period the audit firm is in (c) a copy
. of financial statem. ents
existence. (d) copies of bond and debent
ures

9. Which of the following factors would 13. Knowledge of the-, entity's b .

• usiness d0
least likely affect the quantity and content not help the auditor to-
of an auditor's working papers (a) reduce inherent risk
(a) The assessed level of control risk (b) identify problem areas
(b) The possibility of peer review (c) evaluate reason~bleness of estimates
(c) The nature of auditor's report (d) evaluate appropriates of GAAP.
(d) The content of management
representation letter 14. The main advantage of using statisti(
sampling techniques ts that su
I 0. Wl~ich of the following statement is true techniques:
regarding an auditor's working papers? (a) mathematically measure risk
(a) They document the level of (b) eliminate the need for judgmen
independence maintained by the auditor sampling
(b) 'Pliey should be considered as the (c) defines the values of tolerable error
principle support for the auditor's report (d) all of the them.
(c). They should not contain details
regarding weaknesses in the internal 15. Which of the following methods
control system sample selection is least suitable
(d) They he lp the auditor to monitor the extrapolating results to the population?
effectiveness of the audit linn 's quality (a)· Systematic sampling
control (b) Ra1_1 dom sampling
(c) Ha!Jhazard sampling
..
(d) None
 Audit Prupose

\.ol
•flecO ~s ~rt~;;~~;;;;;;;;;-~----;~lit~~ii'::-i;:-:::-;------~
r.011owing statements is
f thC ,,
aud·t b.
. o ~ective has been a h .
I
187
,;!"1· . It o . directly related to c ieved, is
.. \Vwc ,, piing nsk greater the (a) S 1
. ((Ccl . thC satn atnp e size
• Lo 1,,o'ver (b) Audit risk
(') IC size tolerable error, greater the (c) Materiality
sJ1'1;,11aller the (d) Expected error
(b) le size ected error, smaller the
9111P r the exp
1.,0-..ve
(d le size CAPTIAL AND REVENUE
s3f11P correct
All are EXPENDITURE
(d) following features ·)s most
,vhich of ther random-based se1ect·ion.? I. Which of the fi0 11 •
owmg expenses should
. ,p0rtant fo should be drawn form not be treated as capital expenditure?
,ri sample ·
(a) . (a) Expenses paid on installation. of a
p0Pu1auon strata of population should be plant.
(bl Eveied in th~ sample (b) Co5t ~f ?ismantling a building in case
represen . J1l in the population has an a new bu1ldmg is to be constructed on the
11
(c) Every : · of being selected in the land
equal chanc
(c~ Legal expenses incurred to defend a
sample Id be selected at 'n' th suit related to title of patent. The suit has
(d) Items shou been lost
interval (d) The fees paid to engineer who
. f under reliance is the risk that the constructed the plant.
O
1S.
Risk
le selected to test controls _
sa1np ct· ,
) D es not support the au 1tor s p 1anne
d 2. Which of the following is not a revenue
(a ssoed level of control risk when the expense?
asse . (a) Cost of raising a loan
~e operating effectiveness of the control.
structure justifies such an assessment (b) Cost of accessories of motor vehicles
(b)Supports the auditor's planned spent at the time of purchase
assessed level of control risk when the (c) Expenses incurred for laying of sewers
actual position does not warr.ant such on land purchased
reliance (d) Insurance premium paid at the time of
(c) Is not supported by adequate _ registration of the ship
documents
(d) both (a) & (c) 3. Depreciation.does not arise form
---
(a)effiuxion of time b) use
19. Which of the following factors is (are) (c) obsolescence through technology be
considered in determining the sample size market changes
for tests of control? (d) remarket expectation
(a) Projected error
(b) Tolerable error 4. Which of the following Schedule of the
(c) Expected error Companies · Act, 1956 deals with
(d) Both (b) and (c) depreciations?
(a) Schedule XIV
io. Tolerable e
e
. h .
rror, ts t e maximum monetary (b) Schedule V
rror that the 1d · · · (c) Schedule XIII
in th a~ ttor ts prepared to accept
e population and still conclude that (d) Schedule X
 Scrutiny of Records ft)r Audit Prupose
5
· S chedule XIV has prescribed rates of (d) All of the abov
depreciation for double shift and triple
shift working for which one of the 2. Whi,ch of the follow j
following assets? qualifications of the a:~_sections
(a) Building
(a) Section 226 (l) anct tor_? dea1 1
( b) Plant and Machinery (b) Section 224 (1) and sect~on 22
(c) Furniture and fittings d) Ships 6
( c) Section 226 (3) anct s;ct~on 22tl
(d) Section 224(3) & S ClJon 22 12 i
C> . rr the book value of an asset stands at ec.224 6(4)
· •• . ... .per cent of the original cost, a 3. Which of the followi
company need not provide depreciation on true ?. ng state""'
il. ·••en1 .
18
(a) A partnership firm c
(a) two (b) fifteen a statutory auditor of Ii a_n he apPoin .
(c) five (d)ten .
(b) A ppomtment m1tect c tee
can be m ~rnPany
of the firm ade in the
7. A company has bought patents. Which of ) . ~
(c ~~J_ori_ty of the Partne
the following methods is most suitable for practicing m India · rs should
providing depreciation on them?
(d) AU partners should
(a) SLM (b) WDV ac~ountants be chanei
( c) Sum-of year digits
(d) Any of the above 4. As per the requirements of .
and 226(4) a person is di sect~on 226,
8. Which of the following 1s a revenue .
b emg . squahfiect fr
appomted as a statutory . (
reserve? holds- audrtorjf
(a) Capital redemption reserve (a) Equity shares or debenture
(b)Security premium account company s of t
( c) Debenture redemption ·eserve (b) Equity shares carrying votin .
( d) Capital reserve company g of I
(c) Shares carrying voting rights of
11
9. Which of the following will not lead to corr.ipany
creation of s~ci-et reserve? (d) Security carrying voting rights of t
(a) Undervaluation of closing stock company
(b) Charging capital expenditure to
revenue · 5. The board of directors ·shall appoint fo
( c) Goods sent on consignment being auditor of a company
shown as actual sales (a) With in one m"onth of completion
(d) Charging higher rates of depreciation capital subscription state of.the compan;
on fixed assets than actua11y required (b) With in one month of the promotion
the company
(c) With m one month of ti
COMPANY AUDITOR commencement of the business of ti
company . , .
l. Who is responsible for the appointment of (d) With in one month of incorporationi
statutory aupitor of a limited company ? the company
(a) Directors of the company
(b) Members of the company
( c) The CentraJ Government
 Audit Prupose .
ds for . f fi
.. ttecOf auditor ship O irst Government can b . .
)'. of _.., of the from the date of the above e exercised. d) None' "of
11
, 111 tei ,.. td be .
• 11 'file wou
1 11.
~- ;iodil~:uTlent ti~ -; of statutory meeting If a casual vacan ·
iJPP01 conclU51~ . f first annual general · . _cy in the office of auditor
) tllC nc1us1on o ~i8~bby his resignation it should only be
(ll t)le co I e y the company in a
(b) . g . of next annual general (a) Board meeting · · · · · ···
,11cettfl conctus1on
(O) t~e (b)extrao rdinary general meeting
,ettflg f removal (c) General meeting
ot date o
(d) thC . . fi (d) annual general meeting
. ti· 005 fail to appomt irst
direc .
ase t he hareholders shal1 appomt 12.
~ C ) fueS . For th e purposes of section 224(IB) the
1 ditor (s ' assing a resolution number of partners of a firm which shall
,. au t ...bY p
thetll a ~eral meeting . be taken into account would be as on the
(a) a ge al general meetmg date of
first annu .
(b) torY meeting (a) completion of audit
(c ) statu 1 general meet·mg {b) auditor's report
(d) annua
(c) acceptance of audit
. 1
ce Corpon1tion of India holds (d) Starting of audit work
_ Life Ins~~~ percent of subscribed capital
8
1wen~Z Ltd. The appointment of statutory 13. Which of the following is counted for the
of~ . XYZ Ltd. Would be by_ purposes of section 224(1B) the number of
auditor in .
(a) ordinary resol~t1on partners of a firm which shall be taken
(b) special resolution into account would be as on the data of
(c) (a) or (b) (a) Joint audit
(d) none of the above (b) Audit to non-profit companies
(c) Audit of unlimited companies
ICICI prudential, a life insurance (d) All of the above e) (a) and (b) only
9
· company, hol~s th~rty-two percent of
subscribed share capital of Delta Ltd. The 14. Mr. Narayan, a Charted Accountant, has
statutory auditor of Delta Ltd. would be nineteen audits, Out of following audits
appointed by_ which audits should he accept to ensure he
(a) ordinary resolution doesn't violate provisions of section
(b) Special resolution 224(IB) _
(c) either of the above (a) Audit of Zeba Ltd. a private company
(d} none (b) Audit of branch of Pointec Ltd. a
foreign company
to. Which of the following statement is not (c) Audit of two branches of Virtue Ltd.
true ·regarding appointment of statutory an Indian company·
auditor by the Central Government? (d) All of them
(a) Such powers have been conferred
upon it by section 224(3) · 15. Which audit out of the following would
(b) . If a company fails to appoint an not be regarded as one audit for the
auditor at a general meeting purposes ~f section 224(IB)?
(c)
a .If an auditor refuses to accept (a) Audit of one branch each of two
PPOtntment, the powers of the Central different companies
(b) Joint audit
 Scrui iny of Records for Audit Prupose ◄
(c) Audi! head office & branches 21 . Who out of the fol\ .
(d) Audit of one or more branches of a
. d ow,n
appomte as a statuto . g ca,
company company? ry audi\0
(a) Erstwhile director ·
1CJ. The audilor of a Government company is (b) Internal auditor
appoinled by the C & AG. His (c) Relative of a director
remuneration is fixed by_ (d) Only (b) anct (c)
(a) the C & AG
(b) lhe shareholders 22. A statutory auditor has a •
(c) the shareholders at an annual general all times to fight Oi
meeting (a) Books and accounts of . ·
(d) the board of directors acorr
(b) Books, accounts and do
company cum
I 7, The section which contains prov1swns (c) Books, accounts and v
regarding remuneration of the auditor is_ company . oucJ
(a ) Section 224(9) (d) Notices and docurn
(b) Section224(7)
ent
company
(c) Scction224(8)
d) Section224(6) 23. The auditor has a right to-
(a) Obtain information and ex
18. The authority to remove the first auditor (b) Obtain information and~
before the expiry oftenn is with_ from the employee& and office
(a) the shareholders in a general meeting (c) Obtain information and
(b) the shareholders in the first annual _ · necessary for the purpose of a
General_meeting (d) Both (b) and (c)
(c) the board of directors
(d) the Central Government 24. The principal auditor, as pe1
issued by the ICAI, · does r
19. Which of the following statements is not right to-
correct regarding removal of first auditor (a) Inspect working papers
before expiry of the term? auditor
(a) He is removed at a general meeting (b) Visit branches
(b) The shareholders are authorized to do (c) Seek information neces
so purposes
(c)The approval of the Central (d) Incorporate the branch
Government is required for such removal his audit report
(d) The provisions for such removal are
contained in section 224(7) 25. Under which of the fol.
auditor has a duty to e1
20. The retiring auditor does not have a right specified matters and repor
to (a) Section 227(4A)
(a) make written representations (b) Section 227 (IA)
(b) get his representations circulated .. (c) Section 227 (2)
(c) be heard at the meeting (d) Section 227(3)
(cl) speak as a member of the company
 j\udit prupose
5 191
izecord for quire under section (a) Unlimited liability
. i'/ of ·tof tias to e:t asp~cts, related to (b) Manufacturing
,111 t1d1- differe f
it ,11e ll1A) into for cash for the purpose o (c) Banking
,0. 1.z1 ( allotted (d) Non-profit making
' "'11 iires - c1ude~ whose allotment cash
.s ditof t 0 against . d i
31.
iii.I 511ares een receive . Special audit is conducted at the order of
(ll) tt1allY b d for consideration other t~e Central Government. Which section
11iis ;~ares allott~ gives such powers?
(b) ash d against a debt payable (a) Section 233(A)
tllafl c es allotte
(b) Section 233A
(C) Shaff theHl
AllO (c) Section 242(A)
(d) . nches has been given to (d) Section 242A .
visit bra . ?
•oht to- d r which section.
RI:, ditor un e
!1· the au tion 222(3) 32. Who among the . following can be
(a) ;e~tion 228(2) appointed as special auditor by the Central
(b) e tion 228(4) Government?
(c) ss:~tion 228(3) (a) The statutory auditor
(d) (b) Chartered accountant in practice
h following statements with (c) Any chartered accounted who is not in
Which of tl.e regarding exemption from practice
2s. d to ru es .
regar audit is not true? ' (d) Both (a) and (b)
branch h office of a company can be
(a) A branc mption on the· basis of 33. The scope of the audit including ref~rence
anted exe . .
gr t m of activity cntenon to the pronouncements of the !CAI, which
quan If
u a satisfactory arrangement
' of the auditor adheres to, generally is
(b) • check of the books of account of communicated to the client in the
scrutiny - f: •
Ch office of a manu acturmg i) ·auditor's report ii) engagement letter
a bran .
has been made, it can be iii) representation letter
company .
exempted fonn branch audit (a) i)'only
(c) Cost cons~deration should be .(b) Both (i) 'and (ii)
considered as an important factor/ground (c) Both (i) and (iii)
for exemption from branch audit (d) All the above
(d) The auditor should state in his audit
report that branch office is exempted by 34. If any director is disqualified from being
virtue of quantum of activity or any other appointed under section 27 4( 1) (g), the
basis auditor should mention this fact in his
audit report. For this purpose, how does
29. The branch auditor is appointed by - he determine their eligibility :
(a)Shareholders in an annual general (a) He obtains a representation from _each
meeting director
(b) Shareholders in general meeting (b)He obtains a management
(c) Board of directors in boaFd meeting representation
(d) Any of the above (c) He enquiries from Registrar of
30. A
Companies
. uditor of a . .... .company does not have (d) Any one of the above
nght to visit foreign branches of the
company
 -~
Scrutiny of R .
~-"7:-:~~e7 c~o~rd~s~fo~r:.:_A~u~d~•~t_!P~ru~p~o~s~e-------:-7-=--:-:-------
35 . As ~er ,the 'Statement on Qualification jn (b) Reliance on the repo
Au~ttor s Report's issued by the JCAI, the (c)Inability to obrtt ~f 0 ther 1~i
aud1t or, u nder section 227(3) has to gave · ·
apprQpnate evidential Ill 1ain s11a.u.i-
r.- ~,~
a s t atement of fact on In d
(d) a equacy of accountin a ter '''c" 1cti1
(a) proper books of ac~ount . g records
(b) accounting standards 40. The inventory consists f
O
()
c cess payable under section 441A cent o f all assets. The er ab0 ut on
(d) None of the above restriction on auditoient has irn~ l>ct
· · r to l'\JS..,
observation of stock take Prohj:1
36. The date on auditor's report should not cannot apply alternate auct·~ 1
l'he a.u<r~t
be (a) unqualified opinion Procedure/0r
(a) the data of AGM (b) qualified opinion · ·
(b) later than the date on which the (c) disclaimer of opinion
accounts are approved in board's meeting (d) adverse opinion
(c) earlier than the date on which the
accounts are approved by the management 41. If in the above question th .
(d) Both (a) and (b) consisted of about ten P;r e tnventol'I,
. . cent of ·1
assets, oth er conditions rem . . Iola]
. . aining 8
37. Section 227(2) of the Companies Act, the aud itor should issue 2lncI

requires the auditor to give his report to (a) unqualified opinion -

the members of the company on certain (b) qualified opinion
matters. Which of the following is not (c) disclaimer of opinion
included in the above? ( d) adverse opinion
(a) Accounts examined by him
(b) Every balance sheet and profit and loss 42. The auditor has serious concern ab
account laid before a general meeting gomg . concern o f the company out the.
during his tenure d epend ent on company's obtai· · . 1t IS
(c) Every .document that is a part of or . . . nmg a
workmg cap1 tal loan from a hank whi h
'-annexed to' the balance sheet
( d) Every document which is attached to
has been applied for. The management :r
the company has made full disclosure f
the profit and loss account these facts in the notes to the bal~
sheet. The auditor is satisfied with the
3 8. When restrictions that significantly affect level of disclosure. He should issue
the scope of the audit are imposed by the (a) unqualified opinion -
client, the auditor generally should issue (b) unqualified opinion with reference to
which of the following opinion? notes to the accounts
(a) Qualified opinion (c) qualified opinion
(b) Disclaimer of opinion (d) disclaimer of opinion
( c) Adverse opinion
( d) Unqualified report with 'an emphasis 43. Which of the following is true about
of matter' paragraph; explanatory notes?
(a) These are given by the directors of the
39. Which of the following report not result in company
qualification of the auditor's opinion due (b) These are given to adbere to
to a scope limitation? , _requirements of section 211. . of the
(a) Restrictions the cJient imposed (c) These are given by auditors
company in auditor's report
 _Audit prupose 193
..15 for (d) ~n_y of these depending
orv
-ite' b 0 ve matcnahty and pervasiveness upon
,11 fthc a d f adequacy of d iscl~urc and
,1t1f d metho o
11 o
~ ;1• 1d) A . chaos~ ht line to written
. cl_1e11t froJ11 stra1g This has be~n 47.
011 rtlethod- t ln _c~se t_h e auditor gives a disclaimer of
1 11ere'illtt the financial op1mo~ m the audit report which of the
ii- deP •fl vlll\l: a noH~ :aterial effect on follow1_ng paragraph(s) of a standard
1111
Jo'. ~,1osed . alt }las an. 1 statements. It _is ·
unqualified audit report are modified?
dis el11ents- t financtah .t the change will (a) Scope paragraph
i:il rren r t a . d
s co hOweve , fi t on future perto s. (b) Opinion paragraph
t~cpeeted,. oificant ef .ec option should th e
(c) Scope and opinion paragraphs
c1> a sig following
11avc of the (d) Introductory, · scope and opm1on
111tic\1 ress? . paragraph
\ ditor e"~ d opinion
~IJ uah fie .
3
) l.)nQ . d opinion 48.
( Qoahfie f opinion A departure from recognized accounting
(b) . c1aitt1er o . principle is disclosed in a note to the
(c) pisAdvers
e opinion
. financial statements. The auditor should
(d) e following is not t~ue (a) issue a standard unqualified audit
·ch of th . ments under section report
Whi require 956? (b) issue a qualified report
~,. regarding f the companies Act, l . .
?'77(3) (f) 0 . has to satisfy himself (c) issue an unqualified report with
.... auditor f th •emphasis of matter' paragraph
(a) The of the . director~ o . e
whether a~ether public or pn~ate, are ( d) disclaim opinion
con1p~Y, from being appomted as
disquahfied er section 274(1) (g). 49. AB & Co, chartered accountant, have
directors_as p (l) (g) is applicable to been requested by their client XYZ Ltd.
274
(b) ~ect1ont of directors both in public not to confirm accounts receivables
omtmen . • because of concerns about creasing
app . te companies but reportmg 1s
~d. pdnvato only those directors of a conflicts with customers over amounts
11m1te · ·
who are also directors o a f owed. The auditors were satisfied
company
concerning receivables after applying
public company . . ·
(c) The auditor requires eve~y ~irector to alternative audit procedures AB & Co.'s
submit a written representation_m res~ect auditors report likely contained
of each public company, of which the is a (a) Qualified opinion
director, as to whether such company has (b) Disclaimer of opinion
defaulted in terms of provisions of (c) Unqualified I opinion with an
sections 274(1) (g) explanatory paragraph
(d) The disqualification should be (d) Unqualified opinion
considered on the date of audit report.
SO. The auditor should state the reasons for
46. The management of a company, to which his reservations in audit repo~ and should
AS-3 . is not applicable, does not include try to quantify the effect on them. This
statement of cash flows in its annual should be done in case he has expressed _
report. The auditor should express- i) a qualified opinion ii) an unqualified
(a) Unqualified opinion opinion with emphas,s ~atter ?~
(b) Qualified opinion paragraph iii) an adverse opm1on 1v) ~
(c) Adverse opinion disclaimer of opinion
 Scrutiny of Records for Audit Prupose
(a) i) only
(a) audit of sanctions
(b) i) and (iv) only (b) audit of provision of fi
(c) audit of rules and O d unds
(c) i), iii) and (iv) only . r ers
(d) All of the above (d) aud 1t of financial pr0 .
Pnety
51 . Companies exempted from application of 3. Audit of transaction doe
·
(a) Propnety audit
snot 1·nc111d
CARO, 2003 does not include_
(a) a banking company (b) efficiency-cum Perfo c,
(b) an insurance company ( C) aud~t of rec~ipts ; ..· rt:nanee audit
(c) a private limited company with paid up (d) audit_ _o f expenditure
capital and reserves not more than fifty ~!'- I '
five lakh 4. The income/fax Departn--.
. •uent h
(d) a licensed company X doubl e refund of adv as sen1~
Government Auditor dete ance laJc. ~
. . Cted th' l J
52 . Under CARO, 2003, the auditor's report cond uc_tmg is w~
should include report about maintenance (a) audit of expenditure
of proper recording relating to_ _ (b) performance audit
(a) Fixed assets and cost (c) audit of stores and stock
(b) Fixed assets, cost and investments (d) audit of receipts
(c) Fixed assets , cost investments and
inventories 5. Audit of debt, deposits d
(d) Fixed assets, cost and inventory does not cover- an rernittance:
(a) audit of borrowings
53. Under CARO, 2003 the auditor is required (b) audit of amortization of debt
to report on _ (c) audit of sanctions .
(a) arrears .o f cwnulative preference (d) remittance audit
dividends
(b) Preferential allotment of shares to 6. A state Gove~ent spent rupees fift
related party lakhs on renovation of Rai~ Bhavan' 10r
r. •
1
I~
(c) disposal of fixed assets and its effect Governor. In the C & AG's opinion thi,
on gomg concern. expenditure was more than what occ~io;
(d) unsecured loans granted to related demanded? It is an exampled of -
party. (a) Propriety audit .
(b) Performance audit
GOVERNMENT AUDIT ( c) Audit against provision of funds
(d) None of the above
l. As per C & AG Act, 1971 the tenure of
the Comptroller and Auditor General 1s 7. · Audit reports on PSU are
.. ..... Years (a) submitted to the President/Governor
(a) Four (b) five for being laid before the parliament
(c) six (d) seven (b) Sent to concerned ministries
departments . .
2. The part of Government Audit which is (c) Submitted to BOD of concerned PSl
concerned with examining whether the d) Any of the above
money has been spent for the purpose
specified in Appropriation Act is caJled.

◄
 ds fo r Audit Prupose
ritccor ~ - - - - - - - - - ~
Yo & AG, some years ago, gave
rpf!iC C comm~nts on expenditure numb
f ,Jversed on buying_ cof~~ for soldiers is lcn erio an aJ
ifl'tl~ a war- In his op1mon, the coffins (a) Do\Vn as &on~ . 11i· 195
11 read
Ua} l S lcthaj
~a1ed ~
~ ,mPorted. could •have been replace \b) 'fest fi . qutl
r),SeS jess exp~n~1ve, domestically (c) Checko~_re~ onab\en
,\'ith d ones. Th1s 1s an aspect of _ (d) 0 ign ess
..AuCC • ccurre
pl"" udit of sanctions nee corr .
(a) A d't of stores and stocks 3. W ect1on
au<lit All l . hen co
(b) riety audit be rnputer
. accessed f prograrnrne
(c) proih (b) and (c) hrnited to rorn tennina\ or files can
(d) 130 ( auth · · s, ace
~) appointing :~:ed i~dividuaJse~: can be
( control\'
100g the following is eligible to be ranan -
who.anted as an aud.1t o f Government (c) appointi~g Passwords
~. appoin ? (d) Both (a) g EDP auditor
cornpallY· . . and (b)
A hartered accountant m practice
(a) f\AC chartered accountant whether in 4.
Erroneous d
(b) ,. c ata has b
ctice or not ornputer pro cen detected b
pra An auditor appointed by the C & AG excluded fr gram controls. It has beey
(C) f\ . b om proce . n
(d) AnY of the a ove separately "Error R ss1~~ and printed
most probability by ~n · Who should
ttances on this report? review and follow up
The statutory auditor of a Government
10. Company submits his report to_ (a) system, analyst
(a) the BOD~ of the company (b) Data control group
(c) Programmer
(b)the C & AG c) the Legislature
(d) the company secretary
(d) Computer operator
S.
~;~erdal controls will be ineffective when
fifty
EDP AUDIT epartment- .
or its (a) ~~r_ticipates in computer software
, this Which of the following statement is not acqms1tion decisions
iSion distinguishing feature for computer based (b) Design Documentation for
processing and manual proc~ssing? computerized operations.
(a) Errors in a CIS environment are less (c) Originate changes in master files.
systemic as compared to errors in manual (d) Provide physical security for
processing programme files.
(b)The potential for human error in the
CIS environment is greater as compared 6. Which of the following activities would
to manual system · most likely be performed by EDP
nor (c)ln a computer based accounting d~partment?
system, audit trail is in electronic form (a) Authorising transactions
es/ (d)Computer processing offers (b) ~arity checks
management a variety of analytical tools. (c) Distributing output
;u (d) Correction of transactional errors
1
· To avoid invalid data input, a bank added The completeness of "wages" figure can
an extra number at the end of each 7.
be tested by comparing the number of
account- number and subjected the new
 A rut prupose (d) None of the above
S rutiny of Records for u sed with
c b proc~ f
time cards to e h- t This type 0
es s .,... ·
transaction on w~g )led AUD.I T OF CASlf
control technique ,s ca TRANSACTION
. (a) check total
(b) control total .
t. Which of the following docu
correction
(c) occurre1_1c~ relevant. for vouch'mg cash Sallllents 11
(d) check d1g1t , .. es'> r11
(a) Daily cash sales summary ·
. will not affect audit 111 (b) Salesmen's summary
Which of following
(c) Monthly statements sent to cus
8. a CIS envi~om:ient; pression of opinion 10rnr:ri
(a) The ob3ect1ve o ex d) Ban!' statement ·
on financial statement~ adopted by the
(b) Compliance proce ures 2. The auditor should examine b
su ~~
realization o f revenue such as ct· ."'iu~
auditor t • e procedures . • IVJden;
(c) Perfonnance o_f substan _ivk and control interest, comm1ss1on, etc to- •·"II
(d) Evaluation of inherent ns (a) identify cases of unrecorded
. ' . rev""
risk (b) ensure proper d1sclosure in the bai"1t1
sheet an~~
9. Which of the following state~enls is no; (c) recompute accrued income on th
true of the test data a~proach in/ test..o .. of balance sheet e~
computerised accounting system . - ,· (d) Any of these
(a) Test data tests ~nly those contro s
which the auditor wishes to rely
3. To test whether sales-have been recorde(
(b) Test data should consist of dat~ related
to all controls prevalent m the the auditor should draw a sample fr
file of • , om.
organization
(a) purchase orders
(c) The result of test data indicates that all
the application and general controls are (b) sales orders
functioning properly (c) sales· invoices
(d) Test data processed by the cli_ent:s (d) bill ofloading
computer programme under the auditor s
control 4. For vouching of which item, the aud1torn
most like! y to examine cost records?
l 0. Which of the following CAATs allow (a) Commission earned
fictitious transactions planted by the (b) Bad debts recorded
auditor to be processed along with real (c) Credit sales
ones on client's system? . ( d) Sale of scrap
(a) Integrated test facility
(b) Test data approach 5. The "Guidance Note on Revenue" issueJ
(c) Generalised audit software
by the !CAI does not deal with
(d) Parallel simulation
(a) Sales revenue
(b) Revenue rendering service
11 . An auditor is least likely to use computer
software to- (c) Revenue from sale of fixed assets
(a) access client data files ( d) Income from interest, dividend
(b) assess control risk
6. · · check ~1
( c) perfonning analytical producers An auditor conducts a surpnse aiJ
the pay day (i.e) the day wages
 rds for Audit Prupose
{ E{ecO .
.rtj_ o e paid. The primary purp
,r . s at
~ siJi,fl' . rocedu
.
. res 1s
ose,or
1
· ,his a11d t ~ure that there are no h ln orct
v· 10 erl . g ost th eqo
e au~: Vouch
(#) crs '-1.!lor w· • Wh·
"of~
' ens
ure the casual workers empI
h . oyed
(a) Custo
(c) s rn
Ill ex~. . .
ICb Of ti.
...,nne 13. "-1C ex
197
(b) 1° rized by t e supervisor . ales t -
a)( (b) b
cxc· 1U ofn ~
cmh/} ,
~) :111thte~t procedures for distributing Pay l 1. Wn·1 (d) l lSC duti ., ,
nco..... es .
10 Ie V •••C \aJc
(C 11es . ensure ~~Ching, how
chcq btain understanding of int
to o ernat transact· tnself th \Viii th
(d) 15ystem ent1 .tv> Ions have bat a'II crA~. e a d.
u itor
centro J : een r "'"t Sal
(
a) Exarni . CCorded b es
•. h of the following would pre (b) M n1ng cut- Y the
\
wh1c
payinent o
f th e same voucher? vent . atching off Points
Jollb 1e . . h against entries ·
The person s1~mg t e cheque should renurnb in the
goods outw erect sale . sales book
(a) 1the supportmg documents (c) Count· ard notes s invoices and
;:c~heques should be signed by at best
Ing the
matching the nurnber of i .
reve book number With ~voices and
~ b I ntie ""o persons entries 0
) The data of payment of vouchers of (d) Both ( ) n sales
a ance a and (b)
!~milar nature should be the same or close
the data to each other 12. In case of
. sales retu
(d) All of the above examine Which doc m, the auditor should
(a) Crect·1·t urnents?
notes ad ·
_retum notes ' vice notes and inward
1 case of unclaimed wages, the auditor
s~ould examine whether- (b) Debit notes ad .
retum notes ' vice notes and inward
(a) the amount has been deposited in a
separate bank account _ ~c) Purchase invoic .,
mward retu es, advice notes and
(b) deposited with the cashier m notes
(d) Credit notes · .
(c) held in a safe deposit box inward t ' mspection report and
re um notes
(d) All of these

13. An .. intemal auditor discovered that

~- While vouching . wages, auditor should
itor is fictitious Puz:chases have been recorded by
examine whether there 1s proper the purchase clerk. This indicates absence
segregation of duties. Which of the of which control?
following activities should not be done by (a) Pu~chase invoices are independently
/
same department? matched with purchase orders and goods
(a) Maintaining personnel records and received notes
approving changing in wages rates (b) Goods received notes requires the
(b) Proposing pay roll summary and signature of individual who authorized the
med disbursement of wages purchase
(c) Making salary statements and filing (c) Routine checks are perfonned by
tax returns internal auditor fortnightly.
(d) Purchase function and production
(d) Comparing time clock records with
function are clubbed in one department
time reports prepared by supervisors and
preparing list of workers employed along Wh' h of the following is most crucial to
with the units of production for each one 14. lC ? .
on a purchase department· . ..
of them (a) Reducing the cost of acqms1t1on
nd
 Scrutiny ofRt!cords for Audit Prupose
(b) Selecting supplies (b) Purchases rnay he ,
(c) Authoriz ing the acquisition of goods parties Without mana made fi ,
(d) Assuring the quality of goods (c )Purchases could bgenie ' to"' ,,
flt s 1,_ ·• 1 tti. 1
":'ho m~y have O . a e fro 11,,I~ ~
e 111· d '\llo ~-
15. The auditor is most likely to examine v1ce-pres1dent purchase[fereu Ill~~
related party transactions very carefully (d) Any of these flr,cc ~
while vouching ~
(a) credit sales
(b) sales returns
VERIFICAJ'Jo
(c) credit purchases
VALUATION OF /~ «:
(d) cash purchases "SStl
l. Which of the followin . Sj
16. In ·order to vouch bought ledger, the
·
regard to venfication of g IS n0t tru
. . assets? e ~
auditor obtain confinnations from (a) It mvo1ces substantiar · ,
creditors. The principal reason • for the of transactions ion of occul't
auditor to examine suppliers statements at (b) Its objective is to est bl· Ct((
h .
owners 1p, possession a Jsh .
ex1s1en..
balance sheet date is to obtain evidence . , Valuarion .'(
that d1scJosure of assets ai, '

(a) the supplier exist (c) The auditor has to fonn ~

(b) there are no unrecorded liabilities different aspects an °Pinio0~
(d) Ail are true
(c) recorded purchases actuaJJy occu1:ed .
(d) to link creditors with cash book entnes
2. Which of the foilowing statemen .
17. The creditors accounts, generaJJy, have true ? ts isrlfl
credit balance. Debit balance may be due (a) Valuation of assets is the respons· ..
to- of management ibili~-
(a) advance paid against an order (b) The auditor can rely on a cen·fi
• •• I ICalt
(b) goods returned issued by an authonzed valuationer as
(c) wrong debit to supplier account the valuation of assets in the balance sh; ·
(d) Any of these (c) The auditor should value the asset ~
per generally accepted accountini 1
principle
18. In case of vouching, the auditor is least
likely to e~amine authorization by ( d) Valuation is no part of auditor's duty I
-appropriate authority in case of - I
3. An auditor is verifying valuation of
(a) bad bads written off
building which has been self-construclcl
(b) sales return
by the client. Whicli of the follo1~in1
( c) purchase return
documents is least relevant to the audilor
( d) discount allowed to customers as per
for verification purposes?
organizational policy
(a) Bills of contractor of board oi
(b) Minutes of meeting
19. Vendors should be approved by
Management before purchase department directors . d archit111
(c) Certificates of engineer an
exe~utes an order. If this is not done, then ( d) Loan agreement
which of the following situations may
1
anse- 4. · assets 15· lea.ii I•
Which of the foJlowm~ ?
(a) purchases could be made from vendors likely to be subjected to h~n. I
whose product quality may not be good
 ,i' ,~.,- . ti.JJ1d . atn~rtizat~n p .
.,·' ..1,,,1d ac111nery auditor t . enod is l 9~
1:r" ~ .,flJ r11 rtY rtes to reaso b
-. . .i ·· ' 1•1 r1t ·_ td prope (a) valuati 0 establish . . b na_le. The
( ) . n (b) . · · Y doin -
·~
'-
i,1 I
,:i,c
('.
ir l l
·I . 1of v
110
ehicles c disclosure existence g. n
1 (d) Possession .
' ~1° fixed assets accow1t has 10. \ln_e
,,11. . of I d d l "n n aud·r
., ivsis . ·t·ty of unrecor e sa e of auditor ct· I mg prepaid .
s1b1 Ihinery. W1uc . h o f. th e
e, I ~11:i -
~1, • d pos b onct iscovers
. th at the · Insurance, an
;. \rid
~ \-c:l
., ,t
1 111
au
;~ procedures
. t?
may be . on bu1ldin . insurance par
inspection. This g is_ not available icy
1
p'1 \\,jflg . •coYer I • . (a) No insu may indicate for
fo11° d to dt~ f property tax files b ·1 ranee has b -
JoPte - . auon o u1 ding b) L' een undenak
~ f ~a1111t1 . )ant manager ( )I ien on.build' en for
c nsurance pre . Ing
1ol 1,qtti0' 01. p of debits to accumulated (d) Insurance m1u1:1 has not been paid
i i11inat1on
(~l ~xa recorded premium paid but not
tel , jati0ll
JcPrcc f the above
d)All o . 11. Equity shares of XY .
( . r has noticed existence of Ltd. are in the Ltd. held by ABC
e ~ud 1\~ss~s sale of fixed assets this C custody of St k
111 orporation of Ind· L' . oc Holding
~urr1ng many verify th· . ia im1ted. The auditor
r~dicate 5 . . 011 charges are .insufficient is investment b
1 prec1a11 . (a) Reviewing last e ' y ~
1 De . of sale or disposal of fixed (b) Obt . . y ar s working papers
13 a1mng a c rf fi .
(b) pol~c!s to be reviewed r:sp~nsi?l~ official of ~he'~~ Lt~~m a
3ssets n
The sa
le of assets have not been
~~ Obta1_m_n g a certificate from SHCIL
le) ly authorized Obtammg a certificate from xy ltd.
Proper ounting errors
(d) ACC
12. . Which of the following controls would
. of the following financial e~sure that securities are not lost stolen or
11
WhtC ts assertions are addressed by diverted? '
statemen dd ..
. the cut off for plant asset a _ itlon ~a) Establish physical barriers .over
1es11ng .
·stence and ownership mvestment s~curities ·
(a) EXl •
(b) Valuation and disclosur~ (b) Maintain files of authorized signatures
(c) Possession and ownershi_ p (c) Seg~egate investment approval form
(d)Completeness and valuation accountmg and from custody of securities
(d) All of the above
The auditor while verifying prepaid
insurance has . concluded that there is 1'3. Which of the following is not a proper
inadequate insurance . of building He third party to hold investments on behalf
should_ of the client?
(a) Modify his audit report (a) Regional level custodian
(b) Insist it should be disclosed m the (b) National level custodian
notes to financial statements (c) India trills - National level stock
(c) Write it in letter of weakness broking firm
(d) Both (b) and (c) (d) AEZ Securities Ltd. a stock broking
finn
Wh!le verifying intangible assets. an
auunor · would recompute amortization
charges and determi1~c whether
 Scrutiny of Records for Audit Prupose
(b) obtain a receipt fr 111
14. Which of the following would give t:lC ils return °
custoct· i1;· 1
tan . l
_;:
assurance that debtors mentioned on t 1e
. ? ( c) ensure postage and
reven asl·,,
date of balance sheet actually eXISL
(a) Sending debtor 's confimiatioi~ letters
not counted in physical co Ue stan-i ·
(d) temporary advance uni Ps qi: I
(b) Rcvicwi ng subsequent collect10n s to em
(c) Verify debtors against sales document
d
counte to calculate bal PloYce I
hand ance of s ar.
(d) Bolh (a) and (b) cash I::,

15. Analytical procedures are least likely to 19. Which of the following
. statern
true regard mg to audito ,8 ent is , ,
be use in the audit of - stock taking? . r attendance~
(a) cash balance
(a) Auditor should attend h . c:
(b) investments
taking only if inventory is p Ys_icaJ S!O(:L
(c) bills receivables
( b) "fiA ud. itor
. matenaJ
may _ not attend h
'
(d) debtors
ven 1cat10n of stock by ma P Ysiczj
J fi d . nagernent .
16. Which of the following statements is not ooes not m 1t appropriate t O , 1fhe
true with regard to teeming and lading ? (c) If inventory is material rely 0nit
. . , even wh
(a) It results in the deliberate au d1tor
. 1s not
. placing rel·1ance 0en the
misappropriation of cash receipts pI1ys1cal venfication by the n the
he should attend it management,
(b) It is associated with cash receipts
(c) If same individual maintains cash (d) The primary objective of a .
• n auditor'5
receipts and cash payments teeming and b
o servat1on of an entity's obs .
. ' ervation of
lading is likely to exist ._______ an entity s stock take is to obt . .
kn I d am d1rec1
(d) To conceal the shortage, the defraud, . ow e ge that the stock and has b
property counted een
usually, tries to keep bank and book
amounts in daily agreement so that a bank
reconciliation will .not detect the 20. ~hile observing a client's annual physical
irregularity. mventory, an ~uditor conducted lest
coµnts for certain test counts were higher
I 7. The balance of cash in often between one than the recorded quantities in the-client's
five percent of total assets. Tick the
to perpetual records. This situation couldbe
most appropriate statement with regard to the result of the client' s failure to record -
verification of cash in context of this (a) purchase returns
(a) Cash in always material as materiality (b) sales returns
is qualitative concept (c) goods with consignor
(b) No audit of cash is needed when, in (d) purchase discounts
attditor's opinion, cash is immaterial.
Materiality is a relative concept 21 . Inspection report/receiving report supports
(c) The cash balance need only be audited entries in
if the balance is in overdraft (a) sales book and sales return book
(d) Cash is to be verified if control risk is (b) pure hase book and sales return book
assessed as high (c) cash book and purchase book
(d) Sales book and purchase return book
18, When counting· cash on hand the auditor
should
(~1J ensure presence of somebody from
11 1~111agc1rn.:11t
 . 1•ds tur r « Ju ll J.'a'Upose
. ~ Cl,l) -:::,..------!.....::.::'_'-
/1 '.'j ,eRNf\L CONTROL
/ ,~1 suppl
nod ian
· ~Oo f control are not concerned . ljU· y Of
as t ,,ts O c of controls With <lttcr l ra\v
~ () f,· 1·51cnc _ - (a) risk· his is ltlati:ri,\
Sta
'nps~ 1[ ~• t\rcness of controls , co , usscssnian ex%~s to it
1b) 2(1 I
l3 :fjCC l (c' ntro\ en1 Pie or 1ht
1Plo
tilt- . trity· of controls J supc . Proc1:u : •~t
Yees I (ollllJl (d) co tvrsion Ur~
d .·oning·of controls
of caSqi.. are 1 pi_:~I:,· ntrot
.
ll) l.11 6, environ
. uencc of steps in the auct· l'hc . tnc111
• si.:LJ f · !tor\ ; of Plltnary
llent IS
. 111, ,·• tiotl o mternal control . controt Pt111losc
srd1..1•1 . ts as
assurance is to Of Perro .
tencta not cull
nee (a) th that Provict.c l1li1ng
tain an un d et.standing
.
' 1101\'S . 1
at lc' des1gn
. ere - r C&ts
01J • , due to f are 110 tasonab\
'sicaJ [:ll ti ve test, perform tests of co t (b) rauct ore lllatena1 . e
rial Stock [Jswn . n rol account· ttor in 1·1 tn1sstat
i11 , prelimtnary assessment of co ' c) tng nan · e111cn
·tke .i ntrol ( W11·1t
j ~ '
en syste"'
. "' 1.s c1a\ st·atcrn t:;
. Physic I transact' evidence . Well docu cn1
rnent . a ris~ oesian substantive· tests obtain (d) if . tons is there lo tnentect
·I bl ::, fi ' an
- Yon' It·lfhe ( rstanding, per orrn tests of control 1nternat
control IS. eff ·
support
1 When th
tillJ' Jrehni!11ary
· . assessment of cont 1' 7. If . CC\tve
'e
~ on thee
~e k 31 ro . the auct·ttor
hIgh. .. . assesses c
tnagem ent, riskl Obtain
. an understanding, make a (a) D ontro\ risk
ocument th as
(C 1it11inary assessment of control risk (b) Document he conclusions .
1 auditor' pre f , · Slereas0
. s perform tests o control, design With conc\u . ns along
~ation of s1ons
substantive procedures. (c) Perform tests f
.am direct (d) perfor1;1 tests of control, obt~in and (d) per1orn1
r O control

has been walk through tests

understandmg, mak~ a _preliminary
assessment of control nsk, design 8. Th~ overall attitude and
entity's board of d' awareness of an
1 physical . 1rectors co •
Which of the following is not an inherent importance of internal n~emmg the
: ted test in- control is reflected
:re higher limitation of internal control system?
/a) Management override (a)accounting controls
e-client's
(b) Collusion among employees (b )control environment
could be
(c) Inefficiency of internal auditor (c) control procedures
· record-
(d) supervision
(d) Abuse of authority

9. Which of the following are included in

i An auditor should study and evaluate
test of control? ·
internal controls to- (a) Reperfonnance and observation
(a)detcrmine whether assets are (b) Inquiry and analytical proc~dures
supports safeguarded (c) Comparison and c~nfo~at1on
(b) Suggest improvements in internal (d) Inspection and venf1cat10n
k control
book Control risk is assessedat·
(c) Plan audit procedures ,
(d) express and opinion
\ 0. (a) Overall financial statements le\e\
book (b) Fraud risk factor \eve\ rtion \eve\
XYZ Ltd. Conducts quarterly review or (
c) Financial statement as\se·el
· onment e\
operations. It discovers that unrest in a (d) Control env1r
south cast Asian country may affect the
S-:ru lin y o f R..:cord s for Audit Prupose
i 1. W hi1.:h of the fo llm,v ine is not m1 example (a) Intern risk anct
uf a circ ums tance, in which additiona l controlled by the c~~ltot t-isk , ,
1
tests o f control ,viii no t be per fo rmed after uncontrollable anagt:1nei-it <!..,,.~;:
1
0htai11in g an understanding lo plan the (b) Detecti on risk . . 1.~ _i.
I . is rel• 1.:.
a udit? t 1ey c f feet, vencss _ated dir '
01 the ~~t\
(a) Cont rols arc known to b~ co st prosecutor
inc ffccti,,e , (c) Detection risk reJ, ~~1!, ·
(b) Controls un.: effective but auditor control risk atcct 1
nversll
opines that perfonning tests of control and (d) Internet risk and c i
ontrot ·
reduced substantive tests would not b~ inte1Telated T!sk are~
lit},
cost effective
(c ) Contro ls arc effective and e\'idcnce 16. The independence of .
·11 . an inte
already obtained is adequate to suppo~ a w1 most likely be assu d. mat ~"~
re if h "'-,t,
planned assessed level o f control n sk th c e repor.\:
wh ich is less than high (a) President Finance '
(d) Pcrfom1ing extensive substantive (b) President System
testing would not lead to e ffici ency (c) Managing Director
(d) CEO
12. An auditor assesses control risk because
it- 17. ln comparison to the indep d
(a) affects the audit risk . . en em
an internal auditor is more lik audnu,
(b) affects the level of detection risk that concerned with- ely tot
auditor may accept (a) cost accounting system
(c) helps him to fix materiality level for (b) internal control system
each financial assertion (c) legal compliance
( d) is directly related to inherent risk (d) accounting system
13.A flow chart, made by the auditor, of
an entity' s internal control system is a 18. When an independent auditor decides tb
graphic representation that depicts the
the work perfonned by internal auditors
auditor' s.
may have bearing on the nature, timi~;
(a) understanding of the system and extent of planned audit procedure;,
(b) understanding of fraud risk factors the independent auditor should evaluate
( c )documentation of assessment of control objectivity ·of the internal auditor. The
risk most important factor influencing it wouM
(d) Both (a) and (c) be-
(a) organizational level to whic.h bi
14. The perfom1ancc of tests of control 1s reports .
documented in- (b) qualification of internal auditor
( a) audit programme (c) system of quality control of h\s WOii
(b) flow charts (d) all of the above
(c) working papers
(d) any of the above 19. When an ·mdepcn<l ent aud'1t or relies onthi,
.
work of an internal au d'1tor, he or sr.i
15. Which o f the following statements ts not should- . . I auditor'!
con-cct'! (a) e·xamine the scope of intema
work
 -,,' ds for A udit Yrupose
I -~~cor
. 01 .
f
the system o supervising
(
,., . ,.i:i~ e)(1;11111ndc documentation of internal
I •· 11) afJ 1. b 2. c 3. d 4 F:up Allnrr
' / le"'·eY1 , work . . d - dSc
. ·· 6 C 7
r Ji tor 5 of related audit programme . C 8. 119
.
;11Jl .A qttf!C)' AUDtr OF C . b 10. a 11 .
i (C) ave f thC above
1. c 2. a 3. c 4 A.SlfrRANs
td) aJI o . d 12. d 13 . d s. C 6. C 7 ' ACi10N
g ation of duties reduces the -a 14.c 1s . -a 8.a9 b
,coper segre
. . 5 in whtc. h
a person would VERIF)CAT(ON . C 16. b 17. d 18
JO, tl I l .
r ..;Uf)Jtte AND VAL · 19. u
/ :,i. oPP01' l. a 2. c 3. b 4 c ASSETS lJATlON OF
I kllth· . controls and executes them c 12. d ll . 5, d6. a 7.d 8
i LI" tabl•s1i .
(ll) es ds cash receipts and cash 20. b 21. b. c 14. d 15. a 16. c j d 9. a 10. b 11.
recor 7. a 18. C 19
(b) ents INTERN .C
paYifl rpetuate errors and frauds and 1. d 2. c 3 c 4 5 AL CONTROL
(c) pels them 12 · .c . a6 d7
concea d the transaction in journal and ~O . b 13. a 14. c 15. ·a 16a8.b9. a10.c 11.
(d) recor . .a , c17. b\ 8.a\9. d
1edger.

ANSWERS
RODUCTION TO AUDITING
l~ c 4. b 5. a 6. b 7. d 8. a 9. a 10. b I 1.
1. d2, b · a 14. d 15. b 16. a 17. c 18. b 19. a
13
I 12. bl , '2? d 23. b 24. b 25./b 26. c 27. c
d? C -·
:tl. ~ CONCEPTS OF AUDITING
~ .c 3'.' a4. d 5. d 6. c 7. c 8. d 9 . d 10. d 11.
2
· .a l3. b 14. b 15. d 16. d 17. a 18. b 19. c
12
la 2l.d22.a
. AUDIT EVIDENCE
1
2. b 3. d 4. c 5. .a 6. b 7. d 8. b 9. b 10. d 11.

AUDIT PREPARATION
l2. d 3. a 4. c 5. c 6. d 7. b 8. c 9. d I 0. b l 1.
~.c 13. a 14. a 15. c 16. d 17. c 18. a 19. d

CAPTIAL AND REVENUE

EXPENDITURE
I. d3. c 4. b 5. c 6. d 7. a 8. c 9. a 10. b
COMPANY AUDITOR
!. a 3. c 4. d 5. d 6. b 7. a 8. b 9. a 10. b 1I.
cl3.e 14. c 15. c 16. b 17. c 18. a 19. c
21. b 22. c 23. d 24. a 25. a 26. d 27. c 28.
bjo. a 31. c 32. b 33 . b 34. a 35. b 36. c
l8. a 39. b 40. a 41 . c 42. b 43. d 44. a 45.
-47. c 48. b 49. d 50. a 5 I. c 52. c 53. c
. GOVERNMENT AUDIT
J 3. b 4. a 5. c 6. a 7. b 8. a 9. a l 0. b