4 - Auditing MCQ 50

Auditing for Senior
Auditor
151-200 Solved MCQ’s
By
1. Which of the following statement is
incorrect
a) CARO is applicable on reporting of

consolidated financial statements
b) One Person Companies and Small Companies

are exempted from applicability of CARO
c) If CARO is applicable of the company, it will

also be applicable on audit of branch offices of
the company
d) Insurance Companies are exempted from

applicability of CARO.
2. Outstanding statutory dues as at last day of financial
year concerned for a period of more than __________
months from the day they became payable, shall be
indicated by the auditor.
a) 1 b) 2 c) 5 d) 6
3. With respect of cost records, what is the reporting

requirement under CARO (2016)
a) Whether such accounts and record are properly audited

b) Whether such accounts and records have been made and
maintained
c) Both (a) and (b)
d) None of these
4. Which of the following frauds are reported by auditor

under CARO (2016)
a) Any fraud on the company by vendor of the company

b) Any fraud by the company or any fraud on the company by
its officers or employees
c) All types of frauds d) None of these
5. The auditor shall address audit report on the
financial statement of company
a) To BoD of Company
b) To the Members of Company
B
c) To CG
d) To RoC
6. The date on auditor’s report shall be
a) As on balance sheet date

C
b) Any date after balance sheet date
c) After balance sheet date but not earlier than the date of
approval of financial statement of the entity
d) Date of AGM
7. Cost audit will not be applicable to those companies
D
a) Whose revenue from exports in Forex exceeds 75% of total
revenue
b) Which is operating from SEZ
c) Which is engaged in generation of electricity for captive
consumption through captive generation plant.
d) All of these
8. Cost auditor of company is appointed by B

a) CG
b) BoD
c) Members
d) CAG
D
9. Cost auditor of company shall be appointed by BoD
within __________days from commencement of FY
a) 30 b) 60
c) 120 d) 180
10. Any casual vacancy in the office of cost auditor of
company is filed by
a) BoD within 1 month

c) CG within 30 days
b) BoD within 30 days
d) CAG within 60 days
B
11. Cost Auditor performs cost audit in accordance with
a) Standards on Auditing
b) Basic principles of cost audit
C
c) Cost Audit Standards d) Standards on Related Services
12. Cost audit report shall be submitted by Cost auditor to BoD
within __________ days from closure of FY
a) 90
c) 150
b) 120
d) 180 D
13. When credit purchases of Rs. 5100 is recorded on credit
side and credit sales of Rs. 5100 is recorded on debit side, this
kind of error is called____________________.
a) Error of omission.
principle.
b) Compensating error. c) Error of
d) Error of commission.
B
14. If, as a result of s misstatement resulting from fraud, the
auditor encounters exceptional circumstances that bring into
question his ability to continue performing the auditor shall-
a) Withdraw from the engagement immediately.

b) Report to audit team regarding withdrawal.
C
c) Determine the professional and legal responsibilities applicable in
the circumstances.
d) Ask the management for his withdrawal.
15. Which of the following is an example of inflating
cash payments?
a) Making payments against purchase vouchers.

b) Teeming and lading.
D
c) Not accounting for cash sales fully.
d) Making payments against inflated vouchers.
16. The type of errors, existence of which becomes

apparent in the process of compilation of accounts is
known as-
A
a) Self-revealing errors. b) Intentional errors. c)
Concealed errors. d) Unconcealed errors.
17. Misappropriation of assets may occur because there

C
is-
a) Adequate record keeping with respect to assets.

b) Know history of violations of securities laws.
c) Lack of complete and timely reconciliations of assets.
d) Dispute between shareholders in a closely held entity.
18. The risk of management fraud increases in the
presence of :
a) Frequent changes in supplies

b) Improved internal control system
D
c) Substantial increases in sales
d) Management incentive system based on sale done in a
quarter.
19. Which of the following is an example of fraudulent

financial reporting
a) Defalcation of cash by cashier

C
b) Misappropriation of inventory by store keeper
c) Overvaluation of assets
d) All of these
20. Which of the following frauds is more difficult to

detect
a) Fraud by employees B
b) Fraud by management & TCWG
c) Both (a) and
D) d) None of these
21. Primarily prevention and detection of fraud are the
responsibilities of A
a) TCWG and Management of entity
b) Internal Auditor of entity
c) External Auditor of entity d) All of above
D
22. Which of the following in not a fraud through
suppressing cash receipts:
a) Not accounting for cash sales fully

b) Not accounting for miscellaneous receipts
c) Not accounting for bad debt recovered
d) Making payment against fictitious vouchers.
23. Teeming and lading is a technique of fraud through

C
a) Inflating cash payment b) Wrongs casting in cash book
c) Suppressing cash receipts d) None of these
24. Which of the following error will affect the trial

balance
A
a) Error of partial omission b) Error of principles
c) Error of complete omission d) Compensatory errors
25. The primary purpose of establishing quality control
policies and procedures for deciding on client
evaluation to
B
a) Ensure adherence to generally accepted auditing standards
b) Acceptance or continuance of client’s relationship
c) Ensure audit fees is charged according to the type of audit

work assigned
d) All of above
26. The auditor shall establish existence of

preconditions for an audit of financial statements A
a) Before confirming common understanding between the auditor and
management of the terms of audit engagement.
b) After confirming common understanding between the auditor and

management of the terms of audit engagement.
c) Before appointment of auditor
d) After the date of auditor’s report

27. Terms of auditing engagement are discussed
through C
a) Letter of appointment b) Letter of acceptance
c) Engagement letter d) Letter of weakness
28. Engagement letter is provided by

a) Management to auditor
b) Auditor to Management/TCWG
c) Internal auditor to External Auditor
B
d) CG to Auditor
29. Engagement letter is
a) Always required when auditor is appointed

b) Always required when auditor is reappointed
D
c) Not always required when auditor is reappointed but
except for certain exceptions
d) (a) and (C)
30. Which of the following is not a term of engagement
letter
D
a) Object and Scope of audit
b) Responsibilities of management and TCWG of the entity
c) Fact that audit process may be subject to peer review

under Chartered Accountants Act, 1949
d) Audit Planning
31. The audit engagement letter generally should

include to each of the following except
D
a) Limitation of auditing
b) Responsibilities of management with respect to audit work
c) Expectation of receiving a written representation letter
d) A description of the auditor’s method of sample selection.

32. In which of the following circumstances a new
engagement letter is required in recurring audit
engagement
D
a) Any change in the senior management of the entity
b) Any change in the nature of business of the entity
c) Any change in legal requirement
d) All of the above
33. If auditor is requested by management to change

the audit engagement to an engagement that conveys
a lower level of assurance, then the auditor shall
C
a) Reject the management’s request
b) Accept the management’s request
c) Determine that there is a reasonable justification for doing
so
d) Shall not entertain any such request
34. The partner who is responsible for the auditing
engagement and its performance and for the report
that is issued on behalf of the firm is called as:
C
a) Active partner b) Performing partner c)
Engagement Partner d) Working Partner
35. Which of the following partner can act as

engagement partner
D
a) Any Partner b) Any CA Partner
c) Any CA Partner in full time or part time practice
d) Any CA Partner in full time practice
C
36. Who will take responsibility for overall quality in an
audit of financial statements
a) All the partners of firm b) All CA partners of firm c)

Engagement partner d) Engagement team
D
37. Which of the following information assist the
auditor in accepting and continuing of client
relationship
a) The integrity of the principal owners, key management and

TCWG of the entity
b) Whether the firm and the engagement partner can comply

with the relevant ethical requirements
c) Whether the engagement team is competent to perform

the audit engagement and has the necessary capabilities,
including time and resources
d) All of these
C
38. Appointment of engagement quality control
reviewer is mandatory in case of audit of financial
statements of
a) Any entity
b) Any entity except One Person Company and Small
Company
c) Listed Entity
d) None of these
39. Which of the following in not element of quality
control in an audit of financial statements D
a) Leadership Responsibilities
b) Assignment of Engagement Team
c) Acceptance and Continuance of Client Relationship and

Audit Engagements
d) Signing on Audit Report
40. If any difference of opinion arise within

engagement team or between engagement partner and
C
quality control reviewer, the engagement team follow
a) Engagement partner
b) Engagement quality control reviewer
c) Firm’s policies and procedures
d) Majority of members of engagement team

41. Auditing firms should establish quality control
policies and procedures for personnel management in
order to provide reasonable assurance that
B
a) Employees promoted possess the appropriate
characteristics to perform competently
b) Personnel will have the knowledge required to fulfill
responsibilities assigned
c) The extent of supervision and review in a given instance
will be appropriate
d) All of the above are reasons
42. The least important element in the evaluation of an

audit firm’s system of quality control would relate to
a) Assignment of audit assistants

C
b) Consultation with experts
c) System for determining audit fees
d) Confidentiality of client’s information
43. Policies and procedures w.r.t human resources

address which of the following issues
a) Recruitment
c) Competence
b) Capabilities
d) All of above D
44. The auditor shall B
a) Establish audit strategy on the basis of overall audit plan.
b) Develop overall audit plan on the basis of audit strategy
c) Both (a) and (b)
d) None of these
45. The audit plan is ______________ detailed than

the overall audit strategy.
a) Less
b) More
c) Equal
B
46. Planning is _______________ process of an audit
that often begins shortly after (or in connection with)
the completion of the previous audit and continues
until the completion of the current audit engagement.
a) Continuous
b) Discreet
c) Neither continuous nor discreet
A
47. The auditor shall develop an audit plan that include
a description of:
B
a) The nature, timing and extent of planned risk assessment
procedures.
b) The nature, timing and extent of planned further audit
procedures at the assertion level.
c) Other planned audit procedures that are required to be
carried out so that the engagement complies with SAs.
d) All of the above
D
48. 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
49. Auditor can obtain knowledge of client’s business
from
D
a) Discussion with people within client entity
b) Publication relating to industry
c) Previous experience
d) All of these
50. Benefit(s) of audit planning is A

a) Helping auditor to devote appropriate attention on
important areas of the audit
b) Better preparation of engagement letter
c) Effective communication with retiring auditor
d) It ensure compliance with applicable law and regulation
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4 - Auditing MCQ 50

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Auditing for Senior

a) CARO is applicable on reporting of

b) One Person Companies and Small Companies

c) If CARO is applicable of the company, it will

d) Insurance Companies are exempted from

3. With respect of cost records, what is the reporting

a) Whether such accounts and record are properly audited

4. Which of the following frauds are reported by auditor

a) Any fraud on the company by vendor of the company

6. The date on auditor’s report shall be

a) As on balance sheet date

8. Cost auditor of company is appointed by B

a) BoD within 1 month

11. Cost Auditor performs cost audit in accordance with

a) Withdraw from the engagement immediately.

a) Making payments against purchase vouchers.

16. The type of errors, existence of which becomes

17. Misappropriation of assets may occur because there

a) Adequate record keeping with respect to assets.

a) Frequent changes in supplies

19. Which of the following is an example of fraudulent

a) Defalcation of cash by cashier

20. Which of the following frauds is more difficult to

a) Not accounting for cash sales fully

23. Teeming and lading is a technique of fraud through

24. Which of the following error will affect the trial

b) Acceptance or continuance of client’s relationship

c) Ensure audit fees is charged according to the type of audit

26. The auditor shall establish existence of

b) After confirming common understanding between the auditor and

c) Before appointment of auditor

d) After the date of auditor’s report

28. Engagement letter is provided by

29. Engagement letter is

a) Always required when auditor is appointed

b) Responsibilities of management and TCWG of the entity

c) Fact that audit process may be subject to peer review

31. The audit engagement letter generally should

b) Responsibilities of management with respect to audit work

c) Expectation of receiving a written representation letter

d) A description of the auditor’s method of sample selection.

33. If auditor is requested by management to change

35. Which of the following partner can act as

a) All the partners of firm b) All CA partners of firm c)

a) The integrity of the principal owners, key management and

b) Whether the firm and the engagement partner can comply

c) Whether the engagement team is competent to perform

b) Assignment of Engagement Team

c) Acceptance and Continuance of Client Relationship and

d) Signing on Audit Report

40. If any difference of opinion arise within

b) Engagement quality control reviewer

c) Firm’s policies and procedures

d) Majority of members of engagement team

42. The least important element in the evaluation of an

a) Assignment of audit assistants

43. Policies and procedures w.r.t human resources

45. The audit plan is ______________ detailed than

50. Benefit(s) of audit planning is A

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